DBRS Confirms the Ratings on Phoenix Funding 2 Limited

DBRS Ratings Limited (“DBRS”) has today confirmed the ratings on the Class A Notes issued by Phoenix Funding 2 Limited at ‘A’ (sf).

The confirmation follows amendments to the transaction documentation executed on 22 October 2014. The amendments resulted in the following changes:

• the reduction in the amount of the Reserve Fund to EUR 243.60 million from 621.60 million;
• the re-tranching of the Notes achieved by decreasing the nominal and outstanding principal amount of the Class A Notes by EUR 100.00 million and by increasing the nominal and outstanding principal amount of the Class B Notes by EUR 100.00 million.

Phoenix Funding 2 Limited is a static securitisation of first lien residential mortgage loans secured by properties located in Ireland. The loans were originated by KBC Bank Ireland plc and are serviced by KBC Bank NV, Dublin Branch.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include monthly investor reports provided by KBC Bank Ireland Plc and data from the European DataWarehouse. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 28 August 2014, when DBRS reviewed the transaction and confirmed the ratings of ‘A’ (sf) to the Class A Notes.

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

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (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 mortgages for the Issuer are 38.27% and 54.70%, respectively. At the ‘A’ (sf) rating level, the corresponding PD is 56.01% and the LGD is 69.47%.
• 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 BB (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to BB (low) (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A Notes would be expected to drop to CCC (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of BBB (low) (sf)
• 50% increase in LGD, expected rating of BB (sf)
• 25% increase in PD, expected rating of BBB (low) (sf)
• 50% increase in PD, expected rating of BB (low) (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of B (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of B (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of CCC (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“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 regulations only.

Initial Lead Analyst: Kali Sirugudi
Initial Rating Date: 16 July 2013
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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United Kingdom

Registered in England and Wales: No. 7139960

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

Legal Criteria for European Structured Finance Transactions
Derivative 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
Unified Interest Rate Model for European Securitisations