DBRS Confirms Kingswood Mortgages 2015-1 PLC

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the notes issued by Kingswood Mortgages 2015-1 PLC (Kingswood 2015-1) as follows:

-- Class A confirmed at AAA (sf)
-- Class B confirmed at AA (sf)
-- Class C confirmed at A (sf)
-- Class D confirmed at BBB (sf)
-- Class E confirmed at BB (sf)

The confirmations are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults.
-- Portfolio probability of default (PD) rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

Kingswood 2015-1, which closed in July 2015, is a securitisation of a portfolio of German residential mortgage loans originated by Paratus AMC GmbH (formerly GMAC-RFC Bank GmbH) and initially securitised into E-MAC DE 2009-1 B.V. L2 B.V., wholly owned by Macquarie Bank Limited, London Branch, (Macquarie Bank London) acquired the portfolio in 2014 and sold the portfolio into Kingswood 2015-1. L2 B.V. acts as the Master Servicer of the portfolio and delegates the day-to-day servicing of the portfolio to the Sub-Servicer, Servicing Advisors Deutschland GmbH.

The portfolio is performing within DBRS’s expectations. As of 31 March 2016, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance were at 1.30%, and loans more than 30 days delinquent were at 3.02%. There is currently no realised loss on the portfolio. DBRS has maintained the base case PD and LGD assumptions for the remaining collateral pool at 7.76% and 51.15%, respectively.

The CE available to the rated notes has increased as the transaction deleverages. The CE increased to 33.26%, 22.58%, 18.48%, 15.50% and 13.8% for Class A, B, C, D and E, respectively, as of 27 April 2016. The notes are currently amortising sequentially. The CE to each notes is provided through the subordinately ranked notes, the Rated Notes Reserve Fund (RNRF) available amount, and the overcollateralisation. The RNRF is currently is at its target amount.

Citibank N.A., London Branch is the Account Bank to the transaction, and its current DBRS private rating meets the Minimum Institution Rating criteria given the ratings assigned to the Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Macquarie Bank London is the swap counterparty to the transaction. The DBRS Equivalent Rating of Macquarie Bank London meets the swap counterparty rating requirement given the ratings assigned to the Class A notes, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the 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 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 the investor reports provided by Citibank N.A. Agency and Trust and the loan by loan data from European Data Warehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

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 since the Initial Rating Date.

The last rating action on this transaction took place on 17 July 2015, when DBRS assigned its final AAA (sf) rating to the Class A notes, AA (sf) rating to the Class B notes, A (sf) rating to the Class C notes, BBB (sf) rating to the Class D notes and BB (sf) rating to the Class E notes. The lead responsibilities for this transaction have been transferred to Kevin Ma.

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

To assess the impact of 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 base case PD and LGD for the remaining collateral 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 assumptions for the Kingswood 2015-1 remaining collateral pool are 7.76% and 51.15%, respectively. At the AAA (sf) rating level, the corresponding PD is 31.02% and the LGD is 62.77%. At the AA (sf) rating level, the corresponding PD is 25.30% and the LGD is 60.03%. At the A (sf) rating level, the corresponding PD is 21.55% and the LGD is 57.84%. At the BBB (sf) rating level, the corresponding PD is 17.32% and the LGD is 55.45%. At the BB (sf) rating level, the corresponding PD is 13.21% and the LGD is 53.81%.

-- 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 on Class A would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on Class A would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on Class A would be expected to be at AA (sf).

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

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

Class C Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (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 (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

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

Class E Sensitivity:
-- 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD, expected rating of BB (low) (sf)
-- 50% increase in PD, expected rating of B (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 below B (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: Sebastian Hoepfner, Vice President
Initial Rating Date: 26 June 2015
Initial Rating Committee Chair: Quincy Tang, Managing Director

Lead Surveillance Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Quincy Tang, Managing Director

DBRS Ratings Limited
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London EC3M 3BY
United Kingdom
Registered in England and Wales: No. 7139960

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

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Derivative Criteria for European Structured Finance Transactions

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.