Morningstar DBRS Upgrades and Confirms Ratings on Gemgarto 2021-1 Plc and Gemgarto 2023-1 Plc

DBRS Ratings Limited (Morningstar DBRS) took the following credit rating actions on the notes issued by Gemgarto 2021-1 Plc (Gemgarto 2021) and Gemgarto 2023-1 Plc (Gemgarto 2023) (together, the Issuers):

Gemgarto 2021
-- Class A confirmed at AAA (sf)
-- Class B upgraded to AAA (sf) from AA (high) (sf)
-- Class C upgraded to AA (high) (sf) from AA (low) (sf)
-- Class D upgraded to AA (sf) from AA (low) (sf)

Gemgarto 2023
-- Class A confirmed at AAA (sf)
-- Class B upgraded to AA (sf) from AA (low) (sf)
-- Class C confirmed at A (high) (sf)
-- Class D confirmed at BBB (high) (sf)
-- Class E confirmed at BB (high) (sf)
-- Class F confirmed at BB (low) (sf)

The ratings on the Class A notes in each transaction and the rating of the Gemgarto 2021 Class B notes address the timely payment of interest and ultimate repayment of principal by the legal maturity date. The ratings on the remaining classes of notes in each transaction address the timely payment of interest when most senior, otherwise ultimate payment of interest and ultimate repayment of principal by the legal maturity date.

CREDIT RATING RATIONALE
The credit rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the September 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 credit rating levels.

The transactions are securitisations collateralised by a portfolio of owner-occupied residential mortgage loans granted by Kensington Mortgage Company Limited in England, Wales, and Scotland. Gemgarto 2021 has a legal final maturity date in December 2067 and its first optional redemption date is on the March 2025 payment date. Gemgarto 2021 has a legal final maturity date in December 2073 and its first optional redemption date is on the March 2027 payment date.

PORTFOLIO PERFORMANCE
Gemgarto 2021
As of 31 August 2024, loans two to three months in arrears represented 0.8% of the outstanding portfolio balance, down from 1.6% one year prior. Loans more than three months in arrears represented 10.6%, up from 4.9% one year prior. Cumulative losses were 0.0%.

Gemgarto 2023
As of 31 August 2024, loans two to three months in arrears represented 0.9% of the outstanding portfolio balance, up from 0.2% one year prior. Loans more than three months in arrears represented 1.9%, up from 0.2% one year prior. Cumulative losses were 0.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables in each transaction and has updated its base case PD and LGD assumptions at the B (sf) rating level as follows:
-- Gemgarto 2021: base case PD of 12.5% and base case LGD of 5.5%;
-- Gemgarto 2023: base case PD of 6.7% and base case LGD of 14.9%.

CREDIT ENHANCEMENT
Credit enhancement in both transactions is provided by the subordination of the junior notes and a general reserve fund. As of the September 2024 payment date, credit enhancement to the rated notes had increased from the Morningstar DBRS Initial Rating date as follows:

Gemgarto 2021
-- Class A notes: 39.5%, up from 12.3%;
-- Class B notes: 25.3%, up from 7.7%;
-- Class C notes: 17.4%, up from 5.2%; and
-- Class D notes: 15.8%, up from 4.7%.

Gemgarto 2023
-- Class A notes: 26.4%, up from 14.0%;
-- Class B notes: 13.2%, up from 7.0%;
-- Class C notes: 9.4%, up from 5.0%;
-- Class D notes: 5.7%, up from 3.0%;
-- Class E notes: 3.7%, up from 2.0%;
-- Class F notes: 2.8%, up from 1.5%.

Each transaction has a non-amortising general reserve fund (GRF) that is available to cover senior fees, senior swap payments, interest on the rated notes, and principal losses on the rated notes via the principal deficiency ledgers. The Gemgarto 2021 GRF is funded to its target level of GBP 9.4 million, equal to 2.0% of the initial Class A to Class E notes balance. The Gemgarto 2023 GRF is funded to its target level of GBP 5.5 million, equal to 1.0% of the initial Class A to Class G notes balance.

A Liquidity Reserve Fund (LRF) will also be funded through available principal funds in the event the GRF balance falls below 1.5% of the outstanding Class A to E notes in relation to Gemgarto 2021, or if the GRF balance falls below 0.5% of the outstanding Class A to G notes in relation to Gemgarto 2023. In this event, the LRF will be funded to 2.0% of the outstanding Class A and Class B notes balances for Gemgarto 2021, and to 1.5% of the outstanding Class A and B notes balances for Gemgarto 2023 and replenished each payment date.

Citibank N.A./London Branch (Citibank London) and Barclays Bank PLC (Barclays) act as the account banks for Gemgarto 2021 and Gemgarto 2023, respectively. Based on the Morningstar DBRS private credit rating on Citibank London and the account bank reference rating of Barclays - being one notch below its public Morningstar DBRS long-term critical obligations rating of AA (low) - 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 banks to be consistent with the credit ratings assigned to the rated notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

BNP Paribas, London Branch (BNPP London) and Barclays act as the swap counterparties for Gemgarto 2021 and Gemgarto 2023, respectively. Morningstar DBRS's private credit rating on BNPP London, and public long term critical obligations rating on Barclays of AA (low) is consistent with the First Rating Threshold as described in Morningstar DBRS' " Legal and 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
Social (S) factors
Morningstar DBRS considers the help-to-buy (HTB) scheme applicable to a proportion of the Gemgarto 2021 portfolio, and the Shared Ownership (SO) scheme applicable to a proportion of the Gemgarto 2023 portfolio to be relevant social factors (social impact of products and services) as outlined in the "Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings". HTB loans account for 20.1% of the outstanding Gemgarto 2021 portfolio. Morningstar DBRS' consideration of SO loans as a relevant social factor for the Gemgarto 2023 portfolio follows an increase in the proportion of SO loans in the pool to 10.5% from 8.4% at the Morningstar DBRS Initial Rating. Morningstar DBRS considers the HTB and SO schemes to both be credit negative, although they are not considered to be significant social factors given the limited exposure to HTB and SO loans in the respective transactions.

There were no environmental or 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" (19 November 2024): https://dbrs.morningstar.com/research/443204.

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 transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating actions.

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 and loan-level data provided by Citibank London, U.S. Bank Trustees Limited, and EuroABS.

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 Gemgarto 2021 took place on 15 December 2024, when Morningstar DBRS confirmed its credit rating on the Class A notes at AAA (sf) and upgraded its credit ratings on the Class B, Class C, and Class D notes to AA (high) (sf), AA (low) (sf) and AA (low) (sf), from AA (sf), A (sf), and A (low) (sf), respectively.

The last credit rating action on Gemgarto 2023 took place on 13 December 2024, when Morningstar DBRS finalised its provisional credit ratings on the Class A, Class B, Class C, Class D, Class E, and Class F notes at AAA (sf), AA (low) (sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), and BB (low) (sf) respectively.

The lead analyst responsibilities for Gemgarto 2023 have been transferred to Clare Wootton.

Information regarding Morningstar DBRS credit ratings, including definitions, policies and methodologies is available at 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:
-- Gemgarto 2021: base case PD of 12.5% and base case LGD 5.5%;
-- Gemgarto 2023: base case PD of 6.7% and base case LGD 14.9%.

-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumption.

Gemgarto 2021
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 AA (high) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (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 (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (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 (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)

Gemgarto 2023
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 AA (high) (sf)

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

Class C Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (sf)
-- 50% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD, expected credit rating of A (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 BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (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 (low) (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 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 (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 (low) (sf)
-- 50% increase in PD, expected credit rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of B (high) (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 (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 below B (sf)
-- 50% increase in LGD, expected credit rating below B (sf)
-- 25% increase in PD, expected credit rating below B (sf)
-- 50% increase in PD, expected credit rating below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating below B (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: Clare Wootton, Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Gemgarto 2021 Initial Rating Date: 26 January 2021
Gemgarto 2023 Initial Rating Date: 24 November 2023

DBRS Ratings Limited
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Registered and incorporated under the laws of England and Wales: Company No. 7139960.

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

-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196/.
-- Master European Structured Finance Surveillance Methodology (19 November 2024), https://dbrs.morningstar.com/research/443204/.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781/.
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571/.
-- European RMBS Insight Methodology (3 December 2024) and European RMBS Insight Model v10.0.0.0, https://dbrs.morningstar.com/research/444100/.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913/.

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.