Ratings Assigned To Proteus RMBS' Class A To E Irish RMBS Notes

OVERVIEW

  • We have assigned our ratings to Proteus RMBS' class A to E-Dfrd notes.
  • The transaction is a securitization of a pool of buy-to-let and owner-occupied residential mortgage loans secured on properties, mainly located in Ireland.
  
MADRID (S&P Global Ratings) Dec. 20, 2018--S&P Global Ratings has assigned its 
credit ratings to Proteus RMBS DAC's (Proteus) class A, B-Dfrd, C-Dfrd, 
D-Dfrd, and E-Dfrd notes. Proteus also issued unrated class F, Y notes, and X 
certificates (see list below).

Proteus is a securitization of a pool of buy-to-let (BTL) and owner-occupied 
residential mortgage loans secured on properties in Ireland, other than 77 
properties that are located outside Ireland, originated by Danske A/S.

On Oct. 23, 2017, the seller, Proteus Funding DAC, agreed to purchase a 
portfolio of Irish residential mortgages from the vendor, Danske Bank A/S. On 
the Dec. 15, 2017 closing date, the issuer used the note issuance proceeds of 
the class A, B, C, X, and Y notes (original notes) to purchase the beneficial 
interest of the same portfolio from the seller. After the closing date, the 
legal title of the mortgages moved to the servicer, Pepper Finance Corporation 
(Ireland) DAC, (Pepper) from the vendor. The legal title remains with the 
servicer, unless a perfection trigger occurs.

On the closing date we did not rate the original notes. On the new issue date, 
Dec. 20, 2018, the issuer issued class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, F, Y 
notes, and X certificates (new notes), and will exchange the original notes 
with the new notes. The new notes are backed by the same collateral.

At closing, the transaction did not benefit from external liquidity support. 
Protection to the noteholders was provided only by subordination and excess 
spread. On the new issue date, Proteus has two reserve funds.

The rated notes' interest rate are based on an index of three-month Euro 
Interbank Offered Rate (EURIBOR). Within the mortgage pool, the loans are 
linked to either the European Central Bank (ECB) base rate, or a standard 
variable rate (SVR). There is no swap in the transaction to cover the interest 
rate mismatches between the assets and liabilities. 

Our ratings reflect our assessment of the transaction's payment structure, 
cash flow mechanics, and the results of our cash flow analysis to assess 
whether the notes would be repaid under stress test scenarios. Subordination 
and the general reserve fund provide credit enhancement to the rated notes. 
However, due to the stresses we apply in our analysis the general reserve 
never top up under our rated scenario. The notes amortize sequentially, and do 
not include a trigger to switch to pro rata amortization. Subject to certain 
documented conditions, principal can be used to pay interest and further 
liquidity is provided through the liquidity reserve fund. 

Taking these factors into account, we consider the available credit 
enhancement for the rated notes to be commensurate with the ratings that we 
have assigned. Interest on the class B-Dfrd to E-Dfrd notes can be deferred, 
so our analysis of these notes addresses the ultimate payment of principal and 
the ultimate payment of interest. Once one of the mezzanine or junior notes 
become the most senior outstanding class of notes, interest cannot defer 
anymore, but previously unpaid interest shortfalls can be repaid by the 
transaction's legal maturity date.

Our ratings also reflect the application of our criteria for structured 
finance ratings above the sovereign (RAS criteria; see "Criteria - Structured 
Finance - General: Ratings Above The Sovereign - Structured Finance: 
Methodology And Assumptions," published on Aug. 8, 2016). Our RAS criteria 
designate the country risk sensitivity for residential mortgage-backed 
securities (RMBS) as moderate. Under our RAS criteria, this transaction's 
notes can therefore be rated four notches above the sovereign rating, if they 
have sufficient credit enhancement to pass at least a severe stress. However, 
as all six of the conditions in paragraph 42 of the RAS criteria are met, we 
can assign ratings in this transaction up to a maximum of six notches (two 
additional notches of uplift for the most senior class of notes) above the 
sovereign rating, subject to credit enhancement being sufficient to pass an 
extreme stress. As our long-term sovereign rating on Ireland is 'A+', our RAS 
criteria do not currently constrain our ratings on any class of notes.
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