DBRS Ratings GmbH (DBRS Morningstar) confirmed its rating of AAA (sf) on the Class A Notes issued by Dunmore Securities No. 1 DAC (the Issuer).
The rating action follows an annual review of the transaction and is 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 Class A Notes to cover the expected losses at the AAA (sf) rating level.
Dunmore Securities No. 1 DAC is a public securitisation of residential mortgages originated by Ulster Bank Ireland DAC (Ulster Bank) secured over properties located in Ireland. Ulster Bank services the mortgage portfolio during the life of the transaction with CSC Capital Markets (Ireland) Limited acting as the replacement servicer facilitator.
On 22 October 2019, DBRS Morningstar transferred the ongoing coverage of the rating assigned to the Issuer to DBRS Ratings GmbH from DBRS Ratings Limited. The lead analyst responsibilities for the 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.
As of September 2019, loans with two- to three-months in arrears represented 0.1% of the outstanding portfolio balance and the 90+ days delinquency ratio represented 0.4%, both compared to 0.0% at closing. The cumulative loss ratio remained at 0.0%.
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 7.4% and 18.2%, respectively.
The transaction’s structure provides 25.5% of credit enhancement to the Class A Notes, up from 23.1% at closing. This includes subordination of the Class Z Notes and the non-amortising general reserve fund.
The transaction benefits from a reserve fund of EUR 34.6 million. The subordinated loan funded by the reserve fund, can be applied to cover shortfalls in senior fees, pay interest on the Class A Notes and credit principal deficiency ledger (PDL) debits on the Class A sub-ledgers.
Principal funds can be diverted to pay shortfalls in senior fees and interest on the Class A Notes. This amount will be subsequently debited to the PDL. The PDL also tracks realised loss and provisions for arrears, gradually increasing the percentage of the outstanding balance that has been debited to the PDL as the severity of arrears increases. This allows excess spread to be captured earlier, to recover any future potential losses, which would otherwise have been released to the seller as deferred consideration.
The Bank of New York Mellon SA/NV Dublin branch (BNY Mellon-Dublin) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating of BNY Mellon-Dublin, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank in this transaction to be consistent with the rating assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology”.
DBRS Morningstar 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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for this rating include investor reports provided by Ulster Bank, and loan-level data provided by the European DataWarehouse GmbH.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purpose of providing this rating to be of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
This is the first rating action since the Initial Rating Date.
The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.
Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):
-- DBRS Morningstar 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 7.4% and 18.2%, 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 on the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to AA (high) (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 AA (low) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase of the PD, expected rating of AAA (sf)
-- 50% increase of the PD, expected rating of AA (high) (sf)
-- 25% increase of the LGD, expected rating of AAA (sf)
-- 50% increase of the LGD, expected rating of AA (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of AA (high) (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of AA (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of AA (low) (sf)
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
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: 28 November 2018
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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 Morningstar’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.
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions
A description of how DBRS Morningstar 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 email@example.com.