Fitch assigns Fastnet Securities 9 Limited final ratings

Nov 28 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Fastnet Securities 9 Limited's notes final ratings, as follows:

EUR 500,000,000 Class A1: 'AAsf', Outlook Stable

EUR 81,600,000 Class A2: 'AAsf', Outlook Stable

EUR 40,800,000 Class A3: 'AAsf', Outlook Stable

EUR 61,200,000 Class A4: 'AAsf', Outlook Stable

EUR 336,800,000 Class Z: Not rated

The transaction is a securitisation of EUR1.02bn of owner-occupied residential mortgages originated in Ireland (Other OTC: IRLD - news) by Permanent TSB (Irish: IL0.IR - news) plc (PTSB - Viability Rating: cc, Support Rating: 2). The notes are subject to the structured finance rating cap for Ireland, which is currently 'AAsf'.

Credit enhancement (CE) for the class A notes at 34.0% is provided by the subordination of the class Z (Other OTC: ZHLD - news) notes (33.0%) and a non-amortising reserve fund of 1.0%, fully funded at closing, and excess spread.

KEY RATING DRIVERS

Portfolio of Seasoned Prime Loans

PTSB has selected a well-seasoned (weighted average (WA) seasoning of 81 months) portfolio of prime loans with a relatively low WA original loan-to-value ratio of 61.5%. There are no investment loans, a small number of interest-only loans, and no borrower is currently more than one month in arrears. The vast majority of borrowers in the pool have performed well through the crisis. In Fitch's opinion, this portfolio is less risky than PTSB's overall book as well as typical portfolios in Irish RMBS transactions.

Robust Performance Data Provided

Fitch was provided with annual performance data on PTSB's residential owner-occupied mortgage book covering 2008 to 1Q13. Loan-level repossession data was also provided on 230 loans repossessed and sold between 2009 and 2013. Additionally, loan-level data for the loans in the provisional pools was provided with regards to the historical payment performance, including any instances of past arrears and details of restructurings/forbearance shown on the loans.

Restructured Loans Excluded from Pool (NasdaqGS: POOL - news)

Fitch was provided with detailed information on restructured loans for PTSB's mortgage book. All loans that were restructured at some point for arrears management were excluded from the pool. In addition, any borrowers with historical arrears greater than one month in the past 24 months were also excluded.

Provisioning Mechanism

A default provisioning mechanism is in place at closing, which benefits the transaction cash flows by recognising losses likely to be incurred in the future: (i) up to 25% of the principal balance of a loan when it reaches 90 days in arrears; (ii) 50% when 180 days in arrears; and (iii) 100% when 359 days in arrears. This is particularly helpful for Irish RMBS, given the current delays being experienced in repossession activity.

RATING SENSITIVITIES

Material increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case expectations, which in turn may result in potential rating actions on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency along with a 30% decrease in the WA recovery rate would not result in a model implied downgrade of the class A notes from 'AAsf'.

More detailed model implied ratings sensitivity can be found in the new issue report which is available at www.fitchratings.com.

Fitch was provided with a loan-by-loan data template and all relevant fields were provided.

Annual performance history data was provided on PTSB's residential owner-occupied origination covering 2008 to 2012 on vintages from 1997 to 2012. The majority of the origination vintages performed robustly, in line with or better than PTSB's peer group and the market (based on data from the Central Bank of Ireland (Berlin: BIR.BE - news) ). However, the 2007 and 2008 vintages performed worse than the market and given over 20% of the pool will be made up of these vintages an upward adjustment (5%) was applied to the base underwriting to account for this. Loan-level data on sold repossessions provided by PTSB, consisted of 230 loans sold between 2009 and 2013. The agency used this data to analyse the originator's quick sale adjustment (QSA), which is higher than Fitch's base case assumption of 25% and so a QSA of 30% was applied.

Fitch was provided with loan level data on loans that had been restructured, borrowers who had been granted payment holidays as a forbearance measure and loans that had previous arrears. All restructured loans, borrowers who had payment holidays granted as a forbearance measure in the last 24 months, and any borrowers that had any historic arrears greater than one month in the last 24 months were also removed from the pool.

It is Fitch's opinion that the data available for the rating analysis is of adequate quality.

Fitch reviewed the results of an agreed upon procedures (AUP) and found a number of errors. While none of the errors in themselves were enough to impact materially on the ratings Fitch applied an adjustment to account for the volume of errors.

To analyse the CE levels, Fitch evaluated the collateral using its default model ResiEMEA. The agency assessed the transaction cash flows using default and loss severity assumptions under various structural stresses including prepayment speeds and interest rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by the legal final maturity.

A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for that asset class is available by accessing the appendix that accompanies the new issue report (see "Fastnet Securities 9 Limited - Appendix", dated 27 November 2013 at www.fitchratings.com).

Link to Fitch Ratings' Report: Fastnet Securities 9 Limited