Morningstar DBRS Upgrades and Confirms Credit Ratings on Castell 2021-1 PLC and Castell 2023-2 PLC

DBRS Ratings Limited (Morningstar DBRS) took the following credit rating actions on the rated notes issued by Castell 2021-1 PLC (C2021) and Castell 2023-2 PLC (C2023) (together, the Issuers):

C2021
-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at AAA (sf)
-- Class C notes upgraded to AA (high) (sf) from AA (sf)
-- Class D notes upgraded to AA (sf) from A (high) (sf)
-- Class E notes upgraded to BBB (sf) from BBB (low) (sf)
-- Class F notes confirmed at BB (low) (sf)

C2023
-- Class A1 notes confirmed at AAA (sf)
-- Class A2 notes confirmed at AAA (sf)
-- Class B notes confirmed at AA (high) (sf)
-- Class C notes confirmed at A (high) (sf)
-- Class D notes confirmed at BBB (high) (sf)
-- Class E notes confirmed at BBB (low) (sf)
-- Class F notes confirmed at BB (sf)
-- Class X notes upgraded to A (high) (sf) from BBB (sf)

For C2021, the credit ratings on the Class A and Class B notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date. The credit ratings on the Class C, Class D, Class E, and Class F notes address the timely payment of interest when they are the most senior class of notes outstanding, and the ultimate repayment of principal by the legal final maturity date in November 2053.

For C2023, the credit ratings on the Class A1 and Class A2 notes (together, Class A) addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date. The credit ratings on the Class B notes addresses the timely payment of interest when they are the most senior class of notes outstanding, and the ultimate repayment of principal by the legal final maturity date. The credit ratings on the Class C, Class D, Class E and Class F and Class X notes address the ultimate payment of interest and ultimate payment of principal by the legal final maturity date in November 2055.

CREDIT RATING RATIONALE
The credit rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses as of the October 2024 payment date.
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

The transactions are securitisations of UK second-lien mortgage loans originated by UK Mortgage Lending Limited (UKML, formerly Optimum Credit Limited). UKML is a specialist UK second charge mortgage lender based in Cardiff, which has offered finance to homeowners in England, Wales, and Scotland since its launch in November 2013. Pepper UK Limited (Pepper) is the primary and special servicer of the portfolios.

PORTFOLIO PERFORMANCE
C2021: As of the 30 September 2024 cut-off date, loans two to three months in arrears represented 1.0% of the outstanding portfolio balance, and loans more than three months in arrears represented 3.2%. Cumulative defaults amounted to 0.9% of the original portfolio balance.

C2023: As of the 30 September 2024 cut-off date, loans two to three months in arrears represented 0.5% of the outstanding portfolio balance, and loans more than three months in arrears represented 2.1%. Cumulative defaults amounted to 0.4% of the original portfolio balance.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions at the B (sf) rating level to the following:
-- C2021: A base case PD of 6.3% and a base case LGD of 29.5%.
-- C2023: A base case PD of 7.2% and a base case LGD of 39.3%.

CREDIT ENHANCEMENT
Credit enhancement (CE) is provided by the subordination of the respective junior notes. Current CE levels to the rated notes compared with the CE levels at the Morningstar DBRS previous credit rating actions are as follows:

C2021:
-- Class A CE is 55.3%, up from 41.3%
-- Class B CE is 41.3%, up from 30.8%
-- Class C CE is 28.5%, up from 21.1%
-- Class D CE is 16.8%, up from 12.3%
-- Class E CE is 7.3%, up from 5.1%
-- Class F CE is 3.4%, up from 2.2%

C2023:
-- Class A CE is 30.6%, up from 25.0%
-- Class B CE is 23.0%, up from 18.8%
-- Class C CE is 16.2%, up from 13.3%
-- Class D CE is 10.7%, up from 8.8%
-- Class E CE is 8.3%, up from 6.8%
-- Class F CE is 6.4%, up from 5.3%

C2021 benefits from a liquidity reserve fund (LRF), which covers senior fees, interest on the Class A notes, and senior deferred considerations. The LRF is currently at its target level of GBP 0.7 million equal to 1% of the outstanding Class A notes balance.
C2023 benefits from an LRF, which covers senior fees, interest on the Class A and Class B notes, and senior deferred consideration. The LRF is currently at its target level of GBP 2.6 million equal to 1.3% of the Class A and Class B notes' outstanding balance.

Citibank N.A., London Branch acts as the account bank for both transactions. Based on the Morningstar DBRS private credit rating on the account bank, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes in each transaction, as described in Morningstar DBRS ' "Legal Criteria for European Structured Finance Transactions" methodology.

NatWest Markets Plc acts as the swap counterparty for C2021, and BNP Paribas SA acts as the swap counterparty for C2023. Morningstar DBRS' Long Term Critical Obligations Ratings on the swap counterparties, are AA and AA (high), respectively, above the first rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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 factors 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 at https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

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

The principal methodology applicable to the credit ratings is: "Master European Structured Finance Surveillance Methodology" (6 August 2024) https://dbrs.morningstar.com/research/437540.

Other methodologies referenced in these transactions are listed at the end of this press release.

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transactions in accordance with the principal methodology.

A review of the transactions legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit 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 these credit ratings include investor reports provided by Citibank N.A. London Branch and loan-level data provided by EuroABS and Pepper.

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

At the time of the initial credit ratings, 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.

The last credit rating action on C2021 took place on 21 November 2023, when Morningstar DBRS confirmed its rating on the Class A, Class B, Class E and Class F notes at AAA (sf), AAA (sf), BBB (low) (sf) and BB (low) (sf), respectively, and upgraded its credit rating on the Class C and Class D notes to AA (sf) and A (high) (sf) from AA (low) (sf) and A (sf), respectively.

The last credit rating action on C2023 took place on 16 November 2023, when Morningstar DBRS finalised its provisional credit ratings on the Class A, Class B, Class C, Class D, Class E, Class F and Class X notes at AAA (sf), AA (high) (sf), A (high) (sf), BBB (high) (sf), BBB (low) (Sf), BB (sf) and BBB (sf), respectively.

The lead analyst responsibilities for C2023 have been transferred to Petter Wettestad.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://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):

-- Morningstar DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuers at the B (sf) credit rating level are as follows:
-- C2021: A base case PD of 6.3% and a base case LGD of 29.5%.
-- C2023: A base case PD of 7.2% and a base case LGD of 39.3%.
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions.

C2021
Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

Class B Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

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

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

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

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

C2023
Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (low) (sf)

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

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

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

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

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

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

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: Petter Wettestad, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date:
C2021: 25 October 2021
C2023: 1 November 2023

DBRS Ratings Limited
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The credit rating methodologies used in the analysis of these transactions can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (6 August 2024)
https://dbrs.morningstar.com/research/437540
-- European RMBS Insight Methodology (18 September 2024) and European RMBS Insight Model v10.0.0.0
https://dbrs.morningstar.com/research/439573
-- European RMBS Insight: UK Addendum (16 August 2024)
https://dbrs.morningstar.com/research/437988
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024)
https://dbrs.morningstar.com/research/439913
-- Legal Criteria for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435165
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024)
https://dbrs.morningstar.com/research/439571
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024)
https://dbrs.morningstar.com/research/437781
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024)
https://dbrs.morningstar.com/research/439043

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.