DBRS Takes Rating Actions on Fastnet Securities 6 Limited

DBRS Limited (DBRS) has today taken the following rating actions on the notes issued by Fastnet Securities 6 Limited (Fastnet 6):

-- Class A2 confirmed at AAA (sf),
-- Class A3 upgraded to AA (sf) from AA (low) (sf)

Today’s rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies, defaults and losses,
-- Probability of default (PD) rate, loss given default (LGD) rate and expected loss assumptions for the remaining collateral pool,
-- Sovereign credit strength of the Republic of Ireland, and
-- The credit enhancement (CE) available to the rated notes to cover the expected losses at each class of notes’ relevant rating level.

Fastnet 6 closed in November 2008 and is a securitisation of first-lien Irish residential mortgages originated and serviced by permanent tsb p.l.c. (PTSB; rated BB (low), Positive Trend/R-4, Stable Trend by DBRS).

PORTFOLIO PERFORMANCE
Fastnet 6 is performing within DBRS’s expectations. As of 30 November 2016, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance have decreased slightly to 13.0% from 13.3% a year ago. During the same period, loans more than 12 months delinquent have also decreased slightly to 10.7% from 11.0%. There have been limited repossessions since DBRS’s last rating review. In addition, no losses have been realised in the same time period.

PTSB has been actively repurchasing loans out of the securitised pools and restructuring the delinquent loans. DBRS received loan-by-loan forbearance information from the Servicer and applied additional stresses to these loans in the credit analysis. DBRS has maintained its PD and LGD assumptions on the remaining collateral pool at 24.2% and 44.6%, respectively.

SOVEREIGN UPGRADE
DBRS upgraded the Republic of Ireland’s Long-Term Sovereign Rating to A (high) from “A” on 11 March 2016 (please see the DBRS press release entitled, “DBRS Upgrades Republic of Ireland to A (high)”) and subsequently confirmed the rating at A (high) on 2 September 2016. Following the sovereign upgrade, DBRS now applies less sovereign stress in the transaction analysis by reducing the transaction’s remaining collateral pool’s 2-year PD assumption to 1.81% from 1.86%.

CREDIT ENHANCEMENT
The CE available to the rated notes has increased as the transaction continues to repay. The sources of credit enhancement are provided through the subordination of the junior notes and the non-amortising reserve funds currently at its target level. As of the December 2016 payment date, the CE available to the Class A2 and A3 notes increased to 82.2% and 47.1%, respectively. The increase in CE prompted the upgrade of the Class A3 notes rating to AA (sf).

BNP Paribas Securities Services, London Branch, (BNP London) is the Account Bank of the transaction. BNP London has a DBRS private rating that meets the Minimum Institution Rating criteria as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, given the ratings assigned to the Class A2 notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Master European Structured Finance Surveillance Methodology”.

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 data and information used for these ratings include the monthly investor reports and the loan-by-loan restructuring information from PTSB, and the monthly loan-by-loan data from European DataWarehouse GmbH.

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

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

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 21 January 2016, when DBRS confirmed the Class A2 notes at AAA (sf) and upgraded the Class A3 notes to AA (low) (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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):

-- The base case PD and LGD assumptions for the remaining collateral pool are 24.15% and 44.63%, respectively. At the AAA (sf) rating level, the corresponding PD is 49.93% and the LGD is 74.40%. At the AA (sf) rating level, the corresponding PD is 44.30% and the LGD is 66.13%.

-- 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 the Class A2 notes would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A2 notes would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Class A2 notes would be expected to be at AA (high) (sf).

Class A2 risk 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 AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class A3 risk sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (low) (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 A (high) (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)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“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.

Lead Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 21 January 2015

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, 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

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

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