DBRS Confirms Ratings on Dublin Bay Securities 2018-1 DAC

DBRS Ratings GmbH (DBRS) confirmed its ratings on the bonds issued by Dublin Bay Securities 2018-1 DAC (the Issuer) as follows:

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

The rating assigned to the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the final maturity date. The ratings assigned to the Class B to Class E notes address the ultimate payment of interest and principal.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (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 Issuer is a bankruptcy-remote special-purpose vehicle (SPV) incorporated in the Republic of Ireland. The issued notes were used to fund the purchase of Irish residential mortgage loans originated by Bank of Scotland plc. Bank of Scotland sold the portfolio in May 2018 to Erimon Home Loans Ireland limited, a bankruptcy-remote SPV wholly owned by Barclays Bank plc. The mortgage portfolio consists of first-lien mortgage loans collateralised by owner-occupied and buy-to-let residential properties located in the Republic of Ireland.

On 2 September 2019, DBRS transferred the ongoing coverage of the ratings assigned to the Issuer to DBRS Ratings GmbH from DBRS Ratings Limited. The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Both DBRS Ratings Limited and DBRS Ratings GmbH are registered with the European Securities and Markets Authority (ESMA) under Regulation (EC) No. 1060/2009 on Credit Rating Agencies, as amended, and are registered Nationally Recognized Statistical Rating Organization (NRSRO) affiliates in the United States and Designated Rating Organization (DRO) affiliates in Canada.

PORTFOLIO PERFORMANCE
As of June 2019, loans with two to three months in arrears represented 0.9% of the outstanding portfolio balance. The share of loans with 90+ delinquency was 2.8%, increasing rapidly from 0% at closing nine months ago. DBRS continues to monitor the transaction performance closely.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 4.1% and 20.0%, respectively.

CREDIT ENHANCEMENT
Credit enhancement for the Class A notes is 20.7%, up from 19.7% at closing. Credit enhancement for the Class B notes is 15.5%, up from 14.7 at closing. Credit enhancement for the Class C notes is 12.6%, up from 12.1% from closing. Credit enhancement for the Class D notes is 10%, up from 9.6% at closing. Credit enhancement for the Class E notes is 6.1%, up from 6.0% at closing.

The transaction benefits from a reserve fund of EUR 0.7 million and a Liquidity Reserve Fund of EUR 3.0 million. The reserve fund is available to support the Class A to Class E notes. The reserve fund was fully funded at close at 1.5% of the initial balance of the rated notes less the liquidity reserve fund. The liquidity reserve fund is sized at 1.5% of the Class A balance and provides liquidity support to cover revenue shortfalls on senior fees and interest on the Class A notes. The notes are additionally provided with liquidity support from principal receipts, which can be used to cover interest shortfalls on the most senior class of notes, provided that a debit is applied to the principal deficiency ledgers in reverse sequential order.

The Issuer Account Bank, Paying Agent and Cash Manager is Citibank, N.A., London Branch (Citibank). Based on the DBRS private rating of the Issuer Account Bank, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to Citibank to be consistent with the rating assigned to the Class A notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS has applied the principal methodology consistently and conducted a review of the transaction 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 rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: http://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include Investor Reports provided by Citibank N.A., information provided by Barclays Bank plc and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

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

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

The last rating action on this transaction took place on 28 September 2018, when DBRS finalised its provisional ratings.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- 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 Issuer are 4.1% and 20.0%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A notes would be expected to fall to AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to AA (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to fall to A (sf).

Class A notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus would lead to a downgrade to AA (sf)
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to AA (low) (sf)
-- 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (high) (sf)
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade to AA (sf)
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (low) (sf)
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to A (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to A (high) (sf)
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to A (sf)

Class B notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus would lead to a downgrade to A (high) (sf)
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to A (low) (sf)
-- 25% increase of the LGD, ceteris paribus would lead to a downgrade to A (high) (sf)
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade to A (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to A (sf)
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to A (low) (sf)
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (high) (sf)

Class C notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus would lead to a downgrade to A (low) (sf)
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to BBB (high) (sf)
-- 25% increase of the LGD, ceteris paribus would lead to a downgrade to A (sf)
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade to A (low) (sf)
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (high) (sf)
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (sf)
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (sf)
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (low) (sf)

Class D notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus would lead to a downgrade to BBB (sf)
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to BBB (low) (sf)
-- 25% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (high) (sf)
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade BBB (sf)
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (sf)
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (low) (sf)
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (low) (sf)
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to BB (high) (sf)

Class E notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus would lead to a downgrade to BB (sf)
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to BB (low) (sf)
-- 25% increase of the LGD, ceteris paribus would lead to a downgrade to BB (sf)
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade to BB (low) (sf)
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to BB (low) (sf)
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to B (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to B (high) (sf)
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to B (high) (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 7 September 2018

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

Ratings issued and monitored by DBRS Ratings GmbH are noted as such on the DBRS website; however, the language and related statements in previously published press releases in respect of the relevant ratings will not be changed retroactively and will remain as part of DBRS’s historical record. The ratings issued and monitored in the European Union are marked as such in their respective rating tables. As part of this transfer, these markings will remain unchanged on all active ratings related to the Issuer.

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

-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.