DBRS Morningstar Confirms Rating on Ineos Finance (Ireland) Limited

DBRS Ratings Limited (DBRS Morningstar) confirmed its AA (sf) rating on the Trade Receivables Loan Facility (the Facility) granted to Ineos Finance (Ireland) Limited (the Issuer).

The rating on the Facility addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date, on 31 December 2022.

On 20 January 2020, DBRS Morningstar transferred the ongoing coverage of the ratings assigned to the Issuer to DBRS Ratings Limited from DBRS, Inc. The lead analyst responsibilities for this transaction have been transferred to Natalia Coman.

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

The transaction is a securitisation of trade receivables in the chemical industry granted by subsidiaries of INEOS Holdings Limited (INEOS), located in Belgium, France, Germany, UK, and the US. The trade receivables are purchased by drawings on multicurrency loans (in British pound sterling, euros, and US dollars) issued by four major UK banks with a total commitment of EUR 800 million. Subordinated loans provided by INEOS also finance a portion of the portfolio up to EUR 2 billion.

The transaction originally closed in July 2006 and has been in its revolving period since this date. The Facility commitment was extended to 31 December 2022 from 30 December 2020 following an amendment executed on 9 December 2019.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
--Portfolio performance of the transaction, in terms of delinquencies and cumulative net losses, as of the January 2020 payment date;
--Current sizing of the reserves sufficient to withstand stresses at the AA (sf) rating level.

PORTFOLIO PERFORMANCE
As of the January 2020 payment date, the gross receivables balance was EUR 777 million. Delinquencies are low and have been trending downwards, with two-to-three-month and above three-month arrears representing 0.0% and 0.3% of the gross receivables balance, as of the January 2020 payment date, respectively. As of the January 2020 payment date, the default ratio is 0.0%.

CREDIT ENHANCEMENT
Credit enhancement is provided by overcollateralization in the form of various reserves. As of the January 2020 payment date, the dynamic loss reserve and the dilution reserve stand at 0.8% and 11.9% of the net receivables balance, respectively, while the interest and fee reserve is sized at 0.4% of the outstanding principal balance of the Facility.

Citibank, N.A., London Branch acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of Citibank, N.A., London Branch, 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 to be consistent with the rating assigned to the Facility, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Notes:
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.

Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the eligibility criteria and maximum potential borrowing set forth in the transaction legal documents.

DBRS Morningstar conducted a review of the amended transaction documents in the context of the December 2019 amendment. A review of any other 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: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for this rating include settlement reports and monthly reports provided by Citibank, N.A., London Branch.

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 not 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 purposes 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.

The last rating action on this transaction took place on 25 January 2019, when DBRS Morningstar confirmed the rating on the Facility at AA (sf).

The lead analyst responsibilities for this transaction have been transferred to Natalia Coman.

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

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
--DBRS Morningstar expected a loss stress factor and a dilution stress factor commensurate with the rating level as per the standards described in its “Rating European Trade Receivables Securitisation Transactions” methodology. Changes in the transaction documents with respect to these stress factors can have a direct impact on the rating of the Facility.
--The loss stress factor and dilution stress factor expected at AA (sf) rating level are both 2.25.

Facility Risk Sensitivity:
--A decrease of the loss stress factor and the dilution stress factor to 2.25 from 2.5, expected rating of AA (sf)
--A decrease of the loss stress factor and the dilution stress factor to 2 from 2.5, expected rating of A (sf)
--A decrease of the loss stress factor and the dilution stress factor to 1.75 from 2.5, expected rating of BBB (sf)

For further information on DBRS Morningstar 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 Limited are subject to EU and US regulations only.

Lead Analyst: Natalia Coman, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 3 November 2010

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor,
London EC3M 3BY United Kingdom
Registered and incorporated under the laws of England and Wales: Company No. 7139960

Ratings issued and monitored by DBRS Ratings Limited are noted as such on the DBRS Morningstar 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.

-- Master European Structured Finance Surveillance Methodology
-- Rating European Trade Receivables Securitisation Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Legal Criteria 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 info@dbrs.com.