Morningstar DBRS Finalises Provisional Credit Ratings on London Bridge Mortgages 2025-1 PLC

DBRS Ratings Limited (Morningstar DBRS) finalised its provisional credit ratings on the notes issued by London Bridge Mortgages 2025-1 PLC (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (high) (sf)
-- Class F Notes at B (high) (sf)
-- Class X Notes at CCC (sf)

The finalised credit ratings on the Class E and Class F notes are higher than the provisional credit ratings Morningstar DBRS assigned because of the lower cost of funding in the transaction after the notes priced.

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal on or before the final maturity date in March 2067. The credit ratings on the Class B, Class C, Class D, Class E, and Class F notes address the timely payment of interest once they are the senior-most class of notes outstanding and, until then, the ultimate payment of interest and the ultimate repayment of principal on or before the final maturity date. The credit rating on the Class X notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.

Morningstar DBRS does not rate the residual certificates also issued in this transaction.

CREDIT RATING RATIONALE
The transaction represents the issuance of residential mortgage-backed securities (RMBS) backed by first-lien, owner-occupied, and buy-to-let mortgage loans granted by Vida Bank Limited (VBL or the Originator) in the UK.

The Issuer is a bankruptcy-remote special-purpose vehicle incorporated in the UK. VBL (formerly Belmont Green Finance Limited) has issued several first-lien residential mortgage transactions under the Tower Bridge Funding shelf. This is the first transaction following the renaming of the originator. The most recent transaction rated by Morningstar DBRS is Tower Bridge Funding 2021-2 PLC.

The Issuer issued six tranches of collateralised mortgage-backed securities (the Class A, Class B, Class C, Class D, Class E, and Class F notes) to finance the purchase of the portfolio. Additionally, the Issuer issued one class of noncollateralised notes (the Class X Notes).

The transaction is structured to initially provide 14.0% of credit enhancement to the Class A notes. This includes subordination of the Class B to the Class F notes.

The transaction features a fixed-to-floating interest rate swap, given that the entire pool is composed of fixed-rate loans with a compulsory reversion to floating-rate in the future. The liabilities pay a coupon linked to the daily compounded Sterling Overnight Index Average. Crédit Agricole Corporate & Investment Bank (Crédit Agricole CIB) is the swap counterparty as of closing. Based on Morningstar DBRS' private credit rating on Crédit Agricole CIB, the downgrade provisions outlined in the documents, and the transaction structural mitigants, Morningstar DBRS considers the risk arising from the exposure to the swap counterparty to be consistent with the credit ratings assigned to the rated notes as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

The Bank of New York Mellon, London Branch (rated AA (high) with a Stable trend by Morningstar DBRS) acts as the Issuer Account Bank in the transaction and holds the Issuer's transaction account, the liquidity reserve fund (LRF), and the swap collateral account, while Barclays Bank PLC was appointed as the collection account bank. Morningstar DBRS has a Long Term Critical Obligations Rating of AA (low) and a Long-Term Issuer Rating of "A" on Barclays Bank PLC, both with Stable trends. Both entities meet the eligible credit ratings in structured finance transactions and are consistent with the credit ratings assigned to the rated notes as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Liquidity in the transaction is provided by an LRF which is amortising and sized at 1.0% of the Class A and Class B notes' outstanding balance. It covers senior costs and expenses, swap payments, and interest shortfalls for the Class A and Class B notes, the latter subject to the Class B Notes being the most senior class of notes outstanding, or otherwise subject to the Class B PDL being not greater than 25% of the Class B Notes' outstanding balance (PDL condition). The LRF was partially funded at closing at 0.5% of the Class A and Class B notes' balance using part of the Class X Notes' issuance proceeds. It will then be subsequently funded through available principal funds until the LRF target amount has been transferred (disregarding LRF debits). From that date onwards, the LRF will be funded through revenue. Any liquidity reserve excess amount will be applied as available principal receipts, and the reserve will be released in full once the Class B Notes are fully repaid. In addition, the Issuer can use principal to cover senior costs and expenses, swap payments, and interest on the most senior class of notes outstanding. Principal can be used once the LRF has been exhausted. Interest shortfalls on the Class B to Class F notes, as long as they are not the most senior class outstanding, may be deferred and not be recorded as an event of default until the final maturity date or such earlier date on which the notes are fully redeemed or become the most senior class. Interest shortfalls on the Class X Notes can be deferred until the notes' redemption or maturity.

Morningstar DBRS based its credit ratings on a review of the following analytical considerations:
-- The transaction's capital structure, including the form and sufficiency of available credit enhancement;
-- The credit quality of the mortgage portfolio and the servicer's ability to perform collection and resolution activities. Morningstar DBRS estimated stress-level probability of default (PD), loss given default (LGD), and expected losses (EL) on the mortgage portfolio. Morningstar DBRS used the PD, LGD, and EL as inputs into the cash flow engine and analysed the mortgage portfolio in accordance with its "European RMBS Insight Methodology";
-- The transaction's ability to withstand stressed cash flow assumptions and repay the Class A, Class B, Class C, Class D, Class E, Class F, and Class X notes according to the terms of the transaction documents;
-- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as a downgrade, and replacement language in the transaction documents;
-- Morningstar DBRS' sovereign credit rating on the United Kingdom of Great Britain and Northern Ireland of AA with a Stable trend as of the date of this press release; and
-- The consistency of the transaction's legal structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions that address the assignment of the assets to the Issuer.

Morningstar DBRS' credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Interest Amounts and the related Class Balances.

Morningstar DBRS' credit ratings on the rated notes also address the credit risk associated with the increased rate of interest applicable to each of the rated notes if the rated notes are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction documents.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May, 2025) https://dbrs.morningstar.com/research/454196.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

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

The principal methodology applicable to the credit ratings is the European RMBS Insight Methodology (8 May 2025) https://dbrs.morningstar.com/research/453613.

Other methodologies referenced in this transaction are listed at the end of this press release.

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

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include Vida Bank and its representatives. Morningstar DBRS received a loan-by-loan data tape as of 31 March 2025 as well as historical data sets, which included information on dynamic arrears, current balance, payments received and payments due, each per occupancy type ranging from December 2016 to February 2025. Morningstar DBRS also received data on repossessed properties..

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

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

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

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

These credit ratings concern newly issued financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

This is the first credit rating action since the Initial Rating Date.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

-- In respect of the Class A notes, a PD of 21.5% and an LGD of 39.4% corresponding to the AAA (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class B notes, a PD of 17.0% and an LGD of 31.8% corresponding to the AA (low) (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class C notes, a PD of 13.1% and an LGD of 25.4% corresponding to the A (low) (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class D notes, a PD of 10.5% and an LGD of 21.4% corresponding to the BBB (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class E notes, a PD of 7.1% and an LGD of 18.1% corresponding to the BB (high) (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class F notes, a PD of 4.6% and an LGD of 14.5% corresponding to the B (high) (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class X notes, a PD of 1.9% and an LGD of 11.5% corresponding to the CCC (sf) credit rating scenario was stressed assuming a 25% and 50% increase in the PD and LGD.

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

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

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

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

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

Class F Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of B (sf)
-- 50% increase in LGD, expected credit rating of Below B (sf)
-- 25% increase in PD, expected credit rating of Below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of Below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of Below B (sf)
-- 50% increase in PD, expected credit rating of Below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of Below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of Below B (sf)

Class X Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of Below B (sf)
-- 50% increase in LGD, expected credit rating of Below B (sf)
-- 25% increase in PD, expected credit rating of Below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of Below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of Below B (sf)
-- 50% increase in PD, expected credit rating of Below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of Below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of Below B (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Roger Bickert, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 15 May 2025

DBRS Ratings Limited
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London EC1Y 1HQ United Kingdom
Tel. +44 (0) 20 7855 6600
Registered and incorporated under the laws of England and Wales: Company No. 7139960

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

-- European RMBS Insight Methodology (8 May 2025), https://dbrs.morningstar.com/research/453613 and European RMBS Insight model v 10.1.0.1
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024)
https://dbrs.morningstar.com/research/443196
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024)
https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024)
https://dbrs.morningstar.com/research/439913
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025)
https://dbrs.morningstar.com/research/454196

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.