DBRS Confirms Ratings on Moorgate Funding 2014-1 Plc

DBRS Ratings Limited (DBRS) has today confirmed the following ratings on the bonds issued by Moorgate Funding 2014-1 Plc (the Issuer):

-- Class A1 Notes at AAA (sf);
-- Class B1 Notes at AA (sf);
-- Class C1 Notes at A (low) (sf);
-- Class D1 Notes at BBB (low) (sf);
-- Class E1 Notes at B (sf)

The confirmation of the ratings on the Class A1, B1, C1, D1 and E1 Notes is based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of the February 2015 payment date.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A1 Notes to cover the expected losses at the AAA (sf) rating level, to the Class B1 Notes to cover the expected losses at the AA (sf) rating level, to the Class C1 Notes to cover the expected losses at the A (low) (sf) rating level, to the Class D1 Notes to cover the expected losses at the BBB (low) (sf) rating level and to the Class E1 Notes to cover the expected losses at the B (sf) rating level.

Moorgate Funding 2014-1 Plc is a securitisation of a portfolio of first ranking U.K. non-conforming residential mortgages originated by Mortgages PLC Group, Wave Lending Limited, Close Brothers Limited, Paragon Mortgages Limited and Edeus Mortgages Creators Limited. The mortgage portfolio is serviced by Mortgages PLC, with Homeloan Management Limited acting as the back-up servicer.

The non-conforming characteristics of the portfolio include interest-only loans (85.81%), buy-to-let loans (36.43%), loans where the borrower has self-certified income (57.09%) and loans to borrowers with adverse credit history (10.20% with at least one CCJ, bankruptcy or IVA).

As of February 2015, the 90+ delinquency ratio was at 4.62%, while the 120+ delinquency ratio was at 3.98%. The current cumulative default ratio is low at 0.51%. Defaulted loans are defined as those where the property has been repossessed.

As of the February 2015 payment date, credit enhancement to the Class A1 Notes was 37.11%, up from 34.65% in May 2014. Credit enhancement to the Class B1 Notes was 25.53%, up from 23.65% in May 2014. Credit enhancement to the Class C1 Notes was 16.26%, up from 14.85% in May 2014. Credit enhancement to the Class D1 Notes was 12.47%, up from 11.25% in May 2014. Credit enhancement to the Class E1 Notes was 6.89%, up from 5.95% in May 2014. Credit enhancement to each class of notes consists of subordination of its junior classes, as well as a Principal Reserve Fund and the Principal Residual Certificates.

As of February 2015, the Principal Reserve Fund was at GBP 8.41 million. It was initially funded at 1.00% of the initial balance of the notes (GBP 4.85 million) and is allowed to grow up to a size of 2.10% of the initial balance of the notes (GBP 10.18 million). The transaction also includes a Class A1 Reserve Fund and a Class B1 Reserve Fund. The Class A1 Reserve Fund is currently at GBP 2.50 million and provides liquidity support to the Class A1 Notes. The Class B1 Reserve Fund is currently at GBP 1.50 million and provides liquidity support to the Class A1 and B1 Notes.

Citibank N.A., London Branch holds the Transaction Account for the transaction. The DBRS private rating of Citibank N.A., London Branch complies with the Minimum Institution Rating given the rating assigned to the Class A1 Notes, as described in DBRS’s “Legal Criteria for European Structured Finance.”

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

The principal methodology applicable is Master European Structured Finance Surveillance, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

The sources of information used for this rating include investor reports provided by Citibank N.A., London branch 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.

This is the first rating action on the transaction since the Initial Rating Date.

Information regarding DBRS 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 considered the following stress scenarios as compared with 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 14.10% and 26.79%, respectively. At the AAA (sf) rating level, the corresponding PD is 44.26% and the LGD is 49.89%.
-- 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 A1 Notes would be expected to fall to AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A1 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 A1 Notes would be expected fall to A (high) (sf).

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Class B1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

Class C1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)

Class D1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BB (high) (sf)
-- 50% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)

Class E1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating below B (sf)
-- 50% increase in LGD, expected rating below B (sf)
-- 25% increase in PD, expected rating below B (sf)
-- 50% increase in PD, expected rating below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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: Alastair Bigley
Initial Rating Date: 24 April 2014
Initial Rating Committee Chair: Erin Stafford

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
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Mincing Lane
London
EC3R 7AA
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 (December 2014)
-- Master European Structured Finance Surveillance Methodology (April 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (January 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (January 2015)
-- Unified Interest Rate Model for European Securitisations (January 2013)