Morningstar DBRS Assigns Provisional Credit Ratings to Together Asset Backed Securitisation 2025-2ND1 PLC

DBRS Ratings Limited (Morningstar DBRS) assigned provisional credit ratings to the residential mortgage-backed notes to be issued by Together Asset Backed Securitisation 2025-2ND1 PLC (TABS 2025-2ND1 or the Issuer) as follows:

-- 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 (low) (sf)
-- Class E notes at (P) BB (low) (sf)
-- Class F notes at (P) B (low) (sf)

The provisional credit rating on the Class A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the final maturity date in September 2056. The provisional credit ratings on the Class B, Class C, Class D, Class E, and Class F notes address the timely payment of interest once they are the senior-most class of notes outstanding and until then the ultimate payment of interest and the ultimate repayment of principal on or before the final maturity date.

Morningstar DBRS does not rate the Class Z notes or the residual certificates also expected to be issued in this transaction.

CREDIT RATING RATIONALE
The Issuer is a bankruptcy-remote special-purpose vehicle incorporated in England and Wales. The notes to be issued will fund the purchase of residential assets originated by Together Personal Financial Services Limited (TPFL) and Together Commercial Financial Services Limited (TCFL), part of the Together Financial Group (Together or the Group) in the UK. TPFL and TCFL both act as the servicers of the respective loans in the portfolio. Together is a UK specialist provider of property finance. BCMGlobal Mortgage Services Limited (BCMG) will act as the standby servicer.

This is the third public securitisation backed by second-ranking assets from the Together Group (TABS 2ND). The initial mortgage portfolio consists of GBP 286 million of second-lien owner-occupied (OO) and buy-to-let (BTL) mortgages secured by properties in the UK.

The Issuer is expected to issue seven tranches of collateralised mortgage-backed securities (the Class A, Class B, Class C, Class D, Class E, Class F, and Class Z notes) to finance the purchase of the portfolio.

The transaction is structured to initially provide 28.0% of credit enhancement to the Class A notes, including subordination of the Class B to Class Z notes.

TABS 2025-2ND1 features a fixed-to-floating interest rate swap, given the presence of a portion of fixed-rate loans with a compulsory reversion to floating in the future. The liabilities will pay a coupon linked to the daily compounded Sterling Overnight Index Average. Natixis S.A. (Natixis) is to be appointed as swap counterparty as of closing. Based on Morningstar DBRS' private credit rating on Natixis, the downgrade provisions outlined in the documents, and the transaction structural mitigants, Morningstar DBRS considers the risk arising from the exposure to Natixis 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.

Furthermore, U.S. Bank Europe DAC's UK branch will act as the Issuer Account Bank, and National Westminster Bank Plc will be appointed as the Collection Account Bank. Both entities are privately rated by Morningstar DBRS, meet the eligible credit ratings in structured finance transactions, and are 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.

Liquidity in the transaction is provided by a Liquidity Facility (LF), which is amortising and sized at 1.35% of the outstanding Class A and Class B notes' balance. It covers senior costs and expenses, swap payments, and interest shortfalls for the Class A and Class B notes (the latter after the full redemption of the Class A notes). A Liquidity Reserve Fund (LRF) will be funded from the step-up date through the waterfalls and sized at 1.35% of the outstanding balance of the Class A and Class B notes, while the LF is reduced by the amounts transferred to the LRF ledger. Any liquidity reserve excess amount will be applied as available revenue receipts. The reserve will be released in full once the Class B notes are fully repaid. In addition, principal borrowing is also envisaged under the transaction documentation and can be used to cover for any shortfall in payment of senior fees, swap payments, issuer profit amount, interest shortfalls of the most senior outstanding class of notes (except the Class Z notes), and to replenish the LRF. Principal is to be used ahead of the LRF and LF.

Morningstar DBRS based its credit ratings on a review of the following analytical considerations:
-- The transaction's capital structure, including the form and sufficiency of available credit enhancement;
-- The credit quality of the mortgage portfolio and the ability of the servicer to perform collection and resolution activities. Morningstar DBRS estimated stress-level probability of default (PD), loss given default (LGD), and expected losses (EL) on the mortgage portfolio. Morningstar DBRS used the PD, LGD, and EL as inputs into the cash flow engine. Morningstar DBRS analysed the mortgage portfolio in accordance with its "European RMBS Insight Methodology";
-- The transaction's ability to withstand stressed cash flow assumptions and repay the Class A, Class B, Class C, Class D, Class E, and Class F notes according to the terms of the transaction documents;
-- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as a downgrade, and replacement language in the transaction documents;
-- Morningstar DBRS' sovereign credit rating on the United Kingdom of Great Britain and Northern Ireland of AA with a Stable trend as of the date of this press release; and
-- The expected consistency of the transaction's legal structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions that are expected to address the assignment of the assets to the Issuer.

Morningstar DBRS' credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Interest Amounts and the related Class Balances.

Morningstar DBRS' credit rating on the rated notes also addresses the credit risk associated with the increased rate of interest applicable to each of the rated notes if the rated notes are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction documents.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

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 (13 August 2024) 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 the "European RMBS Insight Methodology" (3 December 2024) https://dbrs.morningstar.com/research/444100/.

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 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 those provided by Together and its representatives. Morningstar DBRS was provided with loan-level, property, and margin data as of 30 November 2024, and the following historical data:
-- Dynamic yearly vintage delinquencies (3 months+), split by OO, BTL, and Commercial BTL (CBTL) from 2004 to 2023.
-- Cumulative 90 days+ arrears, split by OO, BTL, and CBTL from 2011 to 2023.
-- Dynamic monthly prepayments from January 2007 to October 2023, split by interest-only and repayment loans.
-- Quarterly vintage repossessions from Q1 2006 to Q3 2024.

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 this credit rating 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 final credit ratings on the above-mentioned securities is 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 instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

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):

-- In respect of the Class A notes, a PD of 30.4% and an LGD of 80.1% corresponding to the AAA (sf) 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 25.6% and an LGD of 69.2% corresponding to the AA (low) (sf) 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 20.8% and an LGD of 57.5% corresponding to the A (low) (sf) 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 16.3% and an LGD of 46.4% corresponding to the BBB (low) (sf) 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 10.6% and an LGD of 37.9% corresponding to the BB (low) (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class F notes, a PD of 6.6% and an LGD of 33.2% corresponding to the B (low) (sf) 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) (sf)
-- 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD, expected credit rating of AA (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, expected credit rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (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 A (sf)
-- 50% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD, expected credit rating of A(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, expected credit rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (low) (sf)

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

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

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

Class F Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of B (low) (sf)
-- 50% increase in LGD, expected credit rating of Below B (sf)
-- 25% increase in PD, expected credit rating of Below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of Below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of Below B (sf)
-- 50% increase in PD, expected credit rating of Below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of Below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of 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: Roger Bickert, Vice President
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 27 January 2025

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 this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- European RMBS Insight Methodology (3 December 2024), https://dbrs.morningstar.com/research/444100/ and European RMBS Insight Model v. 10.1.0.0.
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196/
-- 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.