DBRS Morningstar Comments on Finsbury Square 2019-2 Plc, Finsbury Square 2019-3 plc, Finsbury Square 2020-1 plc, Gemgarto 2018-1 plc, and Gemgarto 2021-1 plc Following Amendment

DBRS Ratings Limited (DBRS Morningstar) reviewed the impact of an amendment intended to become effective on or around 27 October 2021 (the Amendment) to the Finsbury Square 2019-2 Plc, Finsbury Square 2019-3 plc, Finsbury Square 2020-1 plc, Gemgarto 2018-1 plc, and Gemgarto 2021-1 plc transactions and concluded that the Amendment will not, in and of itself, result in a downgrade or withdrawal of the ratings on each transaction’s outstanding Notes.

The transactions are securitisations of UK first-ranking owner-occupied residential mortgages and buy-to-let mortgages originated and serviced by Kensington Mortgage Company Limited (KMC).

The Amendment aligns the changes made to the Finsbury Square 2019-1 plc transaction in June 2021 on the five above transactions. Please see for more information: https://www.dbrsmorningstar.com/research/380111/dbrs-morningstar-comments-on-finsbury-square-2019-1-plc-following-amendment
Effectively, it consists of the following:
-- From September 2021 onwards, 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 Kensington Synthetic Libor Rate, where the KSR is linked to the Bank of England base rate and the Kensington Synthetic Libor Rate is equal to the three-month TSRR 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.
--From the effective date and where applicable, the options for the reversionary interest rate on additional loans to be linked to either 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.

The Notes and swap in all the transactions are linked to Sterling Overnight Index Average (Sonia). Gemgarto 2018-1 plc was the first KMC transaction where the retirement from the three-month GBP Libor index on Notes, swap, and portfolio was introduced. Please see for more information: https://www.dbrsmorningstar.com/research/375394/dbrs-morningstar-comments-on-gemgarto-2018-1-plc-following-amendment. In the Gemgarto 2021-1 plc transaction, a small portion of portfolio at closing already contained mortgages switching to the Kensington Standard Rate (KSR) after their short-term fixed rate initial period.

DBRS Morningstar performed its analysis in the line with the baseline macroeconomic scenario detailed in the following commentaries: https://www.dbrsmorningstar.com/research/384150/baseline-macroeconomic-scenarios-for-rated-sovereigns and https://www.dbrsmorningstar.com/research/384482/baseline-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 the following commentary published in June 2021: https://www.dbrsmorningstar.com/research/380094/the-impact-of-covid-19-on-european-mortgage-performance-one-year-on.

More information on the transactions can be found at:
Finsbury Square 2019-2 plc: https://www.dbrsmorningstar.com/issuers/23973
Finsbury Square 2019-3 plc: https://www.dbrsmorningstar.com/issuers/24126
Finsbury Square 2020-1 plc: https://www.dbrsmorningstar.com/issuers/24642
Gemgarto 2018-1 plc: https://www.dbrsmorningstar.com/issuers/23279
Gemgarto 2021-1 plc: https://www.dbrsmorningstar.com/issuers/26371

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 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 pound 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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