DBRS Morningstar Upgrades Provisional Ratings on Finance Ireland RMBS No. 4 DAC Following Upgrade on Republic of Ireland

DBRS Ratings GmbH (DBRS Morningstar) upgraded its provisional ratings on the following residential mortgage-backed floating-rate notes to be issued by Finance Ireland RMBS No.4 DAC (the Issuer):

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

DBRS Morningstar also confirmed its provisional ratings on the Class A and Class X notes.

On 14 January 2022, DBRS Morningstar upgraded the Republic of Ireland’s Long-Term Foreign and Local Currency – Issuer Ratings to AA (low) from A (high) and changed the trends to Stable from Positive. Please refer to https://www.dbrsmorningstar.com/research/390794/dbrs-morningstar-upgraded-ireland-to-aa-low-trend-changed-to-stable for more information.

DBRS Morningstar’s credit ratings on structured finance transactions consider sovereign, macroeconomic, and sovereign risk of the country (or countries) in which transaction parties in a securitisation are domiciled. For more details, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

As a consequence, DBRS Morningstar upgraded its provisional ratings on the Class B to Class F notes in this transaction as DBRS Morningstar considers these classes to be affected by the upgrade on Ireland’s ratings and tighter spreads. DBRS Morningstar also confirmed its provisional ratings on the Class A and Class X notes.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 9 December 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/389454/baseline-macroeconomic-scenarios-for-rated-sovereigns-december-2021-update and https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

On 14 June 2021, DBRS Morningstar updated its 5 May 2020 commentary outlining the impact of the coronavirus crisis on performance of DBRS Morningstar-rated RMBS transactions in Europe one year on. For more details, please see: https://www.dbrsmorningstar.com/research/380094/the-impact-of-covid-19-on-european-mortgage-performance-one-year-on and https://www.dbrsmorningstar.com/research/360599/european-rmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda” (29 November 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

DBRS Morningstar 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 ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

The source of information used for these ratings was the Issuer. DBRS Morningstar received the loan-by-loan payment history of the pool to be securitised (starting from 2016) and the current loan-by-loan data template as of 31 December 2021 provided in European Data Warehouse format.

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

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

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

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

These ratings concern expected-to-be-issued new financial instruments. These are the first DBRS Morningstar ratings on these financial instruments.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- In respect of the Class A notes, a PD of 24.1% and LGD of 60.94% , corresponding to the AAA (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.
-- In respect of the Class B notes, a PD of 20.0% and LGD of 51.0%, corresponding to the AA (high) (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.
-- In respect of the Class C notes, a PD of 14.2% and LGD of 47.2%, corresponding to the AA (low) (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.
-- In respect of the Class D notes, a PD of 10.1% and LGD of 41.1% , corresponding to the A (low) (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.
-- In respect of the Class E notes, a PD of 5.9% and LGD of 30.5% , corresponding to the BBB (low) (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.
-- In respect of the Class F notes, a PD of 3.9% and LGD of 28.6%, corresponding to the BB (high) (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.
-- In respect of the Class X notes, a PD of 1.8% and LGD of 18.6% ,corresponding to the B (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.

DBRS Morningstar concludes the following impact on the rated notes:

Class A:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead to no change in the rating.
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (high) (sf).
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes at AA (high) (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the ratings of the Class A notes to AAA(sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (high) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to AA(sf).

Class B:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead to downgrade of the Class B notes to AA (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to AA (low) (sf).
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to AA (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the ratings of the Class B notes to AA (low) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to AA (low) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to A (high) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to A (high) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to A (low) (sf).

Class C:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead to a downgrade of the Class C notes to A (high) (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class C notes to A (low) (sf).
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C notes to A (high) (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the ratings of the Class C notes to A (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C notes to BBB (high) (sf).

Class D:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead to a downgrade of the Class D notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class D notes to BBB (sf).
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would lead to a downgrade of the Class D notes to BBB (high) (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the ratings of the Class D notes to BBB (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class D notes to BBB (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class D notes to BBB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class D notes to BBB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class D notes to BBB (low) (sf).

Class E:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead downgrade of the Class E notes to BBB (low)(sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class E notes to BB (high) (sf).
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would lead to downgrade of the Class E notes to BBB (low) (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the ratings of the Class E notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class E notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class E notes to BB (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class E notes to BB (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class E notes to BB (sf).

Class F:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead downgrade of the Class F notes to BB (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class F notes to BB (low) (sf).
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would lead to downgrade of the Class F notes to BB (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the ratings of the Class F notes to BB (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class F notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class F notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class F notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class F notes to B (high) (sf).

Class X:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead downgrade of the Class X notes to Below B (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class X notes to Below B (sf).
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would lead to downgrade of the Class X notes to Below B (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the ratings of the Class X notes to Below B (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class X notes to Below B (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class X notes to Below B (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class X notes to Below B (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class X notes to Below B (sf).

For further information on DBRS Morningstar 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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Lina Mukhitdinova, Senior Analyst
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 13 January 2022

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Geschäftsführer: Detlef Scholz
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (29 November 2021) and European RMBS Credit Model v 1.0.0.0,
https://www.dbrsmorningstar.com/research/388848/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda.
-- Approach to Environmental, Social and Governance Risk Factors in Credit Ratings (3 February 2021),
https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions
https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions (20 September 2021)
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021), https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021),
https://www.dbrsmorningstar.com/research/384512/operational-risk-assessment-for-european-structured-finance-originators.

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

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