DBRS Confirms and Upgrades Ratings on European Residential Loan Securitisation 2017-PL1 DAC

DBRS Ratings Limited (DBRS) confirmed and upgraded its ratings on the notes issued by European Residential Loan Securitisation 2017-PL1 DAC (the Issuer):

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

The rating on the Class A notes addresses the timely payment of interest and ultimate payment of principal. The ratings on the Class B notes, Class C notes, Class D notes, Class E notes and Class F notes address the ultimate payment of interest and principal.
The ratings follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses as at the February 2018 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels.

The Issuer is a securitisation of first-lien performing and re-performing Irish residential mortgages originated by Bank of Scotland (Ireland) Limited, Start Mortgages DAC and Nua Mortgages Limited. The portfolio is serviced by Start Mortgages DAC, with the primary servicing activities delegated to Computershare Limited.

PORTFOLIO PERFORMANCE
As at February 2018, two- to three-month arrears were 2.0%, down from 2.6% in March 2017; the 90+ delinquency ratio was 6.0%, up from 0.1% in March 2017 and the cumulative loss ratio was 0.1%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 30.0% and 31.3%, from 32.2% and 38.3%, respectively.

CREDIT ENHANCEMENT
As at the February 2018 payment date, CE to the Class A notes was 59.3%, up from 55.5% at the DBRS initial rating. CE to the Class B notes was 46.0%, up from 42.4% at the DBRS initial rating. CE to the Class C notes was 40.8%, up from 37.3% at the DBRS initial rating. CE to the Class D notes was 33.0%, up from 29.6% at the DBRS initial rating. CE to the Class E notes was 24.9%, up from 21.6% at the DBRS initial rating. CE to the Class F notes was 19.7%, up from 16.5% at the DBRS initial rating. CE is provided by subordination of the junior classes and the General Reserve Fund.

The transaction benefits from an amortising Liquidity Reserve Fund of EUR 8.3 million and a non-amortising General Reserve Fund of EUR 11.8 million. Amortised amounts of the Liquidity Reserve Fund will form part of the General Reserve Fund. All else being equal, the General Reserve Fund is expected to increase as the Liquidity Reserve Fund amortises.

The transaction also benefits from an Additional Note Payment Reserve of EUR 2.7 million, which covers any shortfall in additional note payment amounts, following the step-up date on the interest payment date falling in March 2019.

Elavon Financial Services DAC, U.K. Branch acts as the account bank for the transaction. DBRS’s private rating of Elavon Financial Services DAC, U.K. 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.

BNP Paribas SA (publicly rated AA (low) with a Stable trend by DBRS) acts as the Interest Rate Cap Provider for the transaction. DBRS's public Long Term Critical Obligations Rating of BNP Paribas SA at AA (high) is above the First Rating Threshold 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 to the ratings 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 legal documents have remained unchanged since the most recent rating actions.

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 “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 investor reports provided by U.S. Bank Trustees Limited and loan-level data provided by Start Mortgages DAC.

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 30 March 2017, when DBRS finalised its provisional ratings on the notes.

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.

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 ratings, DBRS considered the following stress scenarios as compared with the parameters used to determine the ratings (the Base Case):

-- DBRS expected a lifetime base case PD and 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 30.0% and 31.3%, 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 fall to AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to AA (high) (sf), assuming no change in the PD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to fall to BBB (sf).

Class A 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 (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf).

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

Class D 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 (low) (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 B (high) (sf).

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

Class F Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf).
-- 50% increase in LGD, expected rating of B (high) (sf).
-- 25% increase in PD, expected rating of B (high) (sf).
-- 50% increase in PD, expected rating of B (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of B (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 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 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: Christian Aufsatz, Managing Director
Initial Rating Date: 8 March 2017

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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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Derivative Criteria for European Structured Finance Transactions
-- Interest Rate Stresses 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.