Morningstar DBRS Assigns Provisional Credit Ratings to Ealbrook Mortgage Funding 2024-1 Plc

DBRS Ratings Limited (Morningstar DBRS) assigned the following provisional credit ratings to the bonds to be issued by Ealbrook Mortgage Funding 2024-1 Plc (the Issuer):

-- Class A Notes at (P) AAA (sf)
-- Class B Notes at (P) AA (low) (sf)
-- Class C Notes at (P) A (low) (sf)
-- Class D Notes at (P) BBB (sf)
-- Class E Notes at (P) B (high) (sf)

The provisional credit ratings on the Class A notes address the timely payment of interest and the ultimate payment of principal on or before the final maturity date in August 2066. The provisional credit ratings on the Class B to Class E notes address the timely payment of interest when most senior and the ultimate payment of principal on or before the final maturity date. Morningstar DBRS does not rate the Class R notes also expected to be issued in this transaction.

CREDIT RATING RATIONALE
The Issuer is a bankruptcy-remote special-purpose vehicle (SPV) incorporated in the UK. The collateralised notes are backed by first-lien residential mortgage loans originated in the UK. The provisional portfolio has been originated and will be serviced by Bluestone Mortgages Limited (Bluestone or the Company). In 2023, Bluestone was acquired by Shawbrook Bank Limited (Shawbrook or the Seller), which is the Seller and sponsor of the transaction.

The provisional portfolio as of 31 August 2024 comprises almost entirely (99.1%) owner-occupied mortgages and has a WA original loan-to-value ratio (OLTV) of 68.1% and WA seasoning of 1.0 years. The initial WA coupon of the portfolio of 7.8% and the pool will benefit from a reversionary margin above Bank of England Rate (BBR) of about 3.9%.

The Issuer is expected to issue five tranches of collateralised mortgage-backed securities (the Class A, Class B, Class C, Class D, and Class E notes) to finance the purchase of the initial portfolio. Additionally, the Issuer is expected to issue one class of noncollateralised notes, the Class R notes, the proceeds of which the Issuer will use to fund the GRF and the LRF.

The LRF will be available to cover shortfalls of senior fees and interest on the Class A and Class B notes. The LRF will be amortising and will be sized at closing at 1.4% of the initial Class A and Class B notes. On each Interest Payment Date (IPD) , the target level will be 1.4% of the current amount outstanding of the Class A and Class B notes until the Class B notes have redeemed. The amortisation of the LRF would stop if either: (1) the collateralised notes are not redeemed in full at the FORD; or (2) the cumulative defaults are greater than 5% of closing portfolio balance

The GRF will also provide liquidity and credit support to the rated notes. The GRF will have a target amount on each IPD equal to 1.4% of the initial collateralised notes balance minus the LRF target amount. The GRF will be available to cover shortfalls on senior fees, interest, and any principal deficiency ledger (PDL) debits on the Class A to Class E notes after the application of revenue available funds and LRF draws. The amortisation of the GRF is subject to the same conditions of the LRF amortisation (see above). On the final maturity date, all amounts held in the GRF will form part of available principal funds and the GRF target will be zero.

Morningstar DBRS' credit rating on the rated notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. For the rated securities, the associated financial obligations are the related Interest Payment Amounts and the related Class Balances.

Morningstar DBRS' credit rating on the Class A, Class B, Class C, Class D, and Class E Notes also addresses the credit risk associated with the increased rate of interest applicable to the Class A, Class B, Class C, Class D, and Class E Notes if they are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction documents.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August, 2024) https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker, considering the default rates at which the rated notes did not return all specified cash flows.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodologies applicable to the credit ratings are:

European RMBS Insight: UK Addendum (16 August, 2024) https://dbrs.morningstar.com/research/437988.
European RMBS Insight Methodology (18 September, 2024) https://dbrs.morningstar.com/research/439573.

Other methodologies referenced in this transaction are listed at the end of this press release.
Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for this credit rating include the provisional loan-by-loan pool tape and historical performance data provided by Shawbrook Bank Limited, Bluestone Mortgages Limited and their agents. Historical performance data covered the period from January 2018 until June 2024 and included:
-- Cumulative losses
-- Cumulative defaults
-- Cumulative prepayments
-- Dynamic delinquencies
-- Loan-by-loan repossessions

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned securities are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit ratings.

These credit ratings concern expected to be issued new financial instrument. These are the first Morningstar DBRS credit ratings on this financial instrument.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

-- In respect of the Class A Notes, a probability of default (PD) of 31.1% and loss given default (LGD) of 28.9%, corresponding to the AAA credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class B Notes, a PD of 26.1% and LGD of 21.5%, corresponding to the AA (low) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class C Notes, a PD of 21.4% and LGD of 15.3%, corresponding to the A (low) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class D Notes, a PD of 18.1% and LGD of 12.0%, corresponding to the BBB credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class E Notes, a PD of 9.6% and LGD of 6.4%, corresponding to the B (high) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.

Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (high)
-- 50% increase in LGD, expected credit rating of AA (high)
-- 25% increase in PD, expected credit rating of AA (high)
-- 50% increase in PD, expected credit rating of AA (low)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (low)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (high)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (high)

Class B Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (high)
-- 50% increase in LGD, expected credit rating of A (low)
-- 25% increase in PD, expected credit rating of A (high)
-- 50% increase in PD, expected credit rating of A (low)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (high)

Class C Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BBB (high)
-- 50% increase in LGD, expected credit rating of BBB (high)
-- 25% increase in PD, expected credit rating of BBB (high)
-- 50% increase in PD, expected credit rating of BBB (high)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (high)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (low)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (low)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (high)

Class D Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BBB (low)
-- 50% increase in LGD, expected credit rating of BB (high)
-- 25% increase in PD, expected credit rating of BB (high)
-- 50% increase in PD, expected credit rating of BB (high)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (high)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (low)

Class E Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of B (high)
-- 50% increase in LGD, expected credit rating of B
-- 25% increase in PD, expected credit rating of B
-- 50% increase in PD, expected credit rating of B (low)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of B (low)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of B (low)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of CCC
-- 50% increase in PD and 50% increase in LGD, expected credit rating of CCC

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Lorenzo Coccioli, Vice President
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 24 October, 2024

DBRS Ratings Limited
1 Oliver's Yard 55-71 City Road 2nd Floor,
London EC1Y 1HQ United Kingdom
Tel. +44 (0) 20 7855 6600
Registered and incorporated under the laws of England and Wales: Company No. 7139960

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- European RMBS Insight Methodology (18 September, 2024) and European RMBS Insight model v 10.0.0.0, https://dbrs.morningstar.com/research/439573/
-- European RMBS Insight: UK Addendum (16 August, 2024)
https://dbrs.morningstar.com/research/437988
-- Legal Criteria for European Structured Finance Transactions (28 June, 2024),
https://dbrs.morningstar.com/research/435165
-- Derivative Criteria for European Structured Finance Transactions (6 September, 2024),
https://dbrs.morningstar.com/research/439043
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September, 2024), https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September, 2024),
https://dbrs.morningstar.com/research/439913
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August, 2024),
https://dbrs.morningstar.com/research/437781

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.