DBRS Upgrades Ratings on Celeste Mortgage Funding 2015-1 PLC

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by Celeste Mortgage Funding 2015-1 PLC (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (sf)
-- Class C Notes upgraded to AA (low) (sf) from A (sf)
-- Class D Notes upgraded to A (low) (sf) from BBB (sf)
-- Class E Notes upgraded to BBB (low) (sf) from BB (sf)
-- Class F Notes upgraded to BB (high) (sf) from B (sf)

The ratings on the Class A to F Notes (together, the Rated Notes) address the timely payment of interest and ultimate payment of principal.
The 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.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective rating levels.

Celeste Mortgage Funding 2015-1 PLC is a securitisation of U.K. Buy-to-Let and non-conforming residential mortgages originated by Basinghall Finance Limited (BFL) and GMAC-RFC Limited. The portfolio is currently being serviced by Bluestone Mortgages Ltd (who acquired BFL in December 2014) and Homeloan Management Limited.

PORTFOLIO PERFORMANCE
As of August 2017, two- to three-month arrears were 0.2%, down from 0.4% in August 2016. The 90+ delinquency ratio was 0.4%, down from 1.0% in August 2016. Current realised losses are low at £42,753.

CREDIT ENHANCEMENT
As of the September 2017 payment date, credit enhancement to the Class A Notes was 46.0%, up from 37.2% at the DBRS initial rating. Credit enhancement to the Class B Notes was 32.1%, up from 25.7% at the DBRS initial rating. Credit enhancement to the Class C Notes was 20.7%, up from 16.3% at the DBRS initial rating. Credit enhancement to the Class D Notes was 15.6%, up from 12.1% at the DBRS initial rating. Credit enhancement to the Class E Notes was 11.3%, up from 8.5% at the DBRS initial rating. Credit enhancement to the Class F Notes was 9.5%, up from 7.0% at the DBRS initial rating. Credit enhancement to each class of Rated Notes consists of subordination of junior classes and the Credit Reserve portion of the Reserve Fund.

The transaction benefits from a Reserve Fund that is split into two components, the Credit Reserve and the Liquidity Reserve. The Credit Reserve forms part of available revenue funds and is available to reduce any outstanding PDL balance on the Rated Notes, while the Liquidity Reserve covers senior fees and interest shortfall on the Rated Notes. The Reserve Fund has increased up to its target level of £5.37 million utilising excess spread.

Citibank N.A., London Branch acts as the account bank for each transaction. The DBRS private rating of Citibank N.A., London Branch complies with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is the “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 legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in these transactions 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf

The sources of data and information used for these ratings include reports and loan-level data provided by Bluestone Mortgages Ltd.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of the initial rating, DBRS was 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 these ratings 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 20 December 2016, when DBRS confirmed the ratings on the Rated Notes following the publication of DBRS’s “European RMBS Insight: U.K. Addendum”.

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 loans for the Issuer are 4.8% and 32.6%, respectively.
-- 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf).

Class A Notes 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 AAA (sf).

Class B Notes 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 AA (high) (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 AA (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf).

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

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

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

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

For further information on DBRS historic 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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 11 March 2015

DBRS Ratings Limited
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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
-- European RMBS Insight: U.K. Addendum
-- 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