DBRS Morningstar Comments on Finsbury Square 2019-1 Plc Following Amendment

DBRS Ratings Limited (DBRS Morningstar) reviewed the impact of an amendment effective on 16 June 2021 (the Amendment) to the Finsbury Square 2019-1 plc transaction and concluded that the Amendment will not, in and of itself, result in a downgrade or withdrawal of the rating on the Class A, Class B, Class C, Class D, and Class E Notes (together, the Notes).

The Amendment consists of the following changes:
-- From the March 2022 payment date, which coincides with a step-up in the coupon on the Notes, a switch of the index on the Notes and the swap to Sterling Overnight Index Average (Sonia) from three-month GBP Libor with an additional margin of 0.01193% on each of the Notes;
-- From September 2021 onward, a migration of the three-month GBP Libor-linked mortgages to the Kensington Standard Rate (KSR) or the three-month Term Sonia Reference Rate (three-month TSRR) or a synthetic Libor, where the KSR is linked to the Bank of England base rate and the synthetic Libor is equal to the three-month TSSR and an additional margin of 0.01193%;
--From the effective date, the options for the reversionary interest rate on product switch loans to be linked either to three-month GBP Libor, KSR, or three-month TSRR.

The changes are taking place in the context of the discontinuation of the Libor index by the Financial Conduct Authority, and the absence of a guarantee that the Libor index will continue to exist after 2021.

DBRS Morningstar performed its analysis in the line with a moderate macroeconomic scenario detailed in the following commentaries: https://www.dbrsmorningstar.com/research/375376/global-macroeconomic-scenarios-march-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings.

For more information about DBRS Morningstar’s view on the impact of the Coronavirus Disease (COVID-19) pandemic on residential mortgage-backed securities transactions, please see: https://www.dbrsmorningstar.com/research/360599/european-rmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

The transaction is a securitisation of UK first-ranking owner-occupied residential mortgages originated and serviced by Kensington Mortgage Company Limited (KMC). The portfolio is static. The transaction’s legal maturity date is on the payment date in June 2069.

More information on the transaction can be found at: https://www.dbrsmorningstar.com/issuers/23786.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in British pounds sterling unless otherwise noted.

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

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