Press Release

DBRS Morningstar Places Ratings on Six Irish RMBS Transactions Under Review Following Release of European RMBS Insight: Irish Addendum

RMBS

June 09, 2023

DBRS Ratings GmbH (DBRS Morningstar) placed its ratings on 30 tranches in six Irish residential mortgage-backed securities (RMBS) transactions Under Review as follows:
-- 14 tranches placed Under Review with Positive Implications (UR-Pos.) in Dilosk RMBS No. 5 DAC, Finance Ireland RMBS No.4 DAC, and Finance Ireland RMBS No. 5 DAC
-- 16 tranches placed Under Review with Negative Implications (UR-Neg.) in Dublin Bay Securities 2018-MA1 DAC, Proteus RMBS DAC, and Roundstone Securities No.1 DAC

The complete list of ratings affected is available at the end of this press release.

KEY RATING DRIVERS AND CONSIDERATIONS
On 5 June 2023, DBRS Morningstar finalised its “European RMBS Insight: Irish Addendum” (the Irish Addendum) to the “European RMBS Insight Methodology” (the Methodology) and corresponding European RMBS Insight Model (the Model) and withdrew its “Irish Residential Mortgage Addendum” to the “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda” published on 28 November 2022.

The Irish Addendum and Model present the criteria for which Irish RMBS and covered bonds ratings are assigned and/or monitored. The distressed sale discount (DSD), market value decline (MVD), and foreclosure cost assumptions, which are part of the Irish Addendum, are also used to rate Irish small and medium-size enterprises (SME) and nonperforming loan (NPL) transactions, but no rating actions are expected on SME or NPL transactions following the publication of the Irish Addendum.

Analysis of the Irish residential mortgages per the Irish Addendum includes indexation of the underlying property values up to December 2022. The Irish Addendum details the Irish Loan Scoring Approach, with nine risk segments constructed for nonrestructured loans and six risk segments constructed for restructured loans.

Two DSD assumptions have been estimated for residential properties in Ireland where the property valuation took place either before or after 2013. The DSD assumption for valuation dates before or in 2013 is typically 35%, while for valuation dates after 2013, it is typically 20%.

The Irish MVD assumptions are estimated at the national level and for six regions reported in the House Price Tool provided by the Central Statistics Office of Ireland (CSO). The CSO Index covers quarterly data since 2007 for each of the Irish regions. Real house prices were calculated using the harmonised CPI data with Q2 2018 as the base year and indexed up to December 2022. MVD assumptions are applied to the indexed property value to discount the sale price of a property to calculate realised losses at each rating level.

For more details, see the following press release:
https://www.dbrsmorningstar.com/research/415309/dbrs-morningstar-publishes-final-methodology-on-european-rmbs-insight-irish-addendum-and-withdraws-irish-residential-mortgage-addendum-to-master-european-rmbs-rating-methodology.

As a result of the application of the Methodology, DBRS Morningstar placed the ratings on the aforementioned tranches Under Review. DBRS Morningstar may rate other classes of notes in each transaction that it has not placed Under Review.

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

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the ratings are the “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology, and the “European RMBS Insight: Irish Addendum” (5 June 2023), https://www.dbrsmorningstar.com/research/415306/european-rmbs-insight-irish-addendum.

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

DBRS Morningstar is undertaking a review and will remove the ratings from this status as soon as it is appropriate.

A review of the transactions’ legal documents was not conducted as the legal documents have remained unchanged since the most recent rating actions for each transaction.

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/401817/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include investor reports provided by the cash manager, trustee, and/or servicer in each transaction and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial ratings, 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.

The last rating action on Dilosk RMBS No. 5 DAC took place on 21 October 2022, when DBRS Morningstar confirmed its rating on the Class A Notes at its current rating level and upgraded its ratings on the Class B, Class C, Class D, Class E, and Class F Notes.

The last rating action on Dublin Bay Securities 2018-MA1 DAC took place on 16 December 2022, when DBRS Morningstar confirmed its ratings on the rated notes.

The last rating action on Finance Ireland RMBS No.4 DAC took place on 3 February 2023, when DBRS Morningstar confirmed its ratings on the Class A, Class B, Class C, Class D, Class E, and Class F notes at their current rating levels and upgraded its rating on the Class X notes.

The last rating action on Finance Ireland RMBS No. 5 DAC took place on 24 October 2022, when DBRS Morningstar finalised its provisional ratings on the Class A, Class B, Class C, Class D, and Class E notes.

The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.

The last rating action on Proteus RMBS DAC took place on 16 December 2022, when DBRS Morningstar confirmed its ratings on the Class A, Class B, and Class C notes at their current rating levels and upgraded its ratings on the Class D and Class E notes.

The last rating action on Roundstone Securities No.1 DAC took place on 21 September 2022, when DBRS Morningstar confirmed its ratings on the Class A, Class B, and Class C notes at their current rating levels and upgraded its ratings on the Class D and Class E notes.

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

These ratings are Under Review with either Positive or Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. Further information on potential rating sensitivity as a result of this methodological change will be available when the Under Review status on the ratings is resolved.

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

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Dilosk RMBS No. 5 DAC
Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 5 October 2021

Dublin Bay Securities 2018-MA1 DAC
Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 22 October 2018

Finance Ireland RMBS No.4 DAC
Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 13 January 2022

Finance Ireland RMBS No. 5 DAC
Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 6 October 2022

Proteus RMBS DAC
Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 13 December 2018

Roundstone Securities No.1 DAC
Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 September 2018

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The rating methodologies used in the analysis of these transactions can be found at: http://www.dbrsmorningstar.com/about/methodologies.

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

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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