Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Shamrock Residential 2021-1 DAC on 12 January 2022 and considered the investor reporting up to 24 November 2021. The credit ratings remain as follows:

Class A (XS2267897234): EUR 263.3m: outstanding AAA_SF

Class B (XS2267897580): EUR 29.9m: outstanding of AA+_SF

Class C (XS2267897747): EUR 24.5m: outstanding A+_SF

Class D (XS2267898042): EUR 17.2m: outstanding BBB_SF

Class E (XS2267898125): EUR 13.1m: outstanding BB_SF

Class F (XS2267898398): EUR 5.7m: outstanding B+_SF

Class G (XS2267898471): EUR 10.4m: outstanding B-_SF

Scope did not assign ratings to the subordinated classes RFN, Z1, Z2 and X, which combine EUR 26.2m of notional.

Shamrock Residential 2021-1 DAC is a true-sale securitisation of an Irish residential mortgage loan pool, serviced by Start Mortgages DAC and Pepper Finance Corporation (Ireland) DAC. The securitised portfolio contains a mix of delinquent, current and historically restructured, as well as current and never restructured loans. These mortgage loans are mainly first-lien secured on residential properties located in Ireland. The transaction benefits from a moderate weighted average current loan-to-value ratio of the mortgage loans below 80%.

The structure comprises 11 classes of notes with fully sequential principal amortisation and two cash reserve funds (liquidity and non-liquidity reserve fund). Class A will pay a floating rate indexed to 1-month Euribor, plus a margin of 0.85% or a step-up margin of 1.5% from July 2023. The ratings on the Class B to G notes reflect a periodic minimum of: i) the index plus margin or step-up margin on the notes, as applicable; and ii) the net weighted average coupon, ranging from 1.2% as of closing to 1.7% as of the maturity date, in accordance with the transaction documentation and Scope’s assumption of asset coupons and senior fees.

The transaction closed on 04 February 2021.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action on the credit ratings of this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The rated notes benefit from their respective credit enhancement, which has increased from closing, due to amortisation. The liquidity reserves remain fully funded and the portfolio performs in line with expectations. The improving macroeconomic situation and the increase in the nominal house price index support the good collateralisation of the mortgages underlying this transaction.

Covid-19 is still spurring some uncertainty regarding the future macroeconomic development in the country, where new lock-down measures may have an impact on household credit affordability and lead to increased defaults and redefaults.

Credit-positive (+)

Transaction performance (positive). Serious arrears have remained constant since closing, while prepayments of 4.23% have helped to deleverage the structure faster than expected. Portfolio losses to date mainly comprise of losses from restructured loans that were known and factored in at closing.

Transaction liquidity (positive). The liquidity mechanics have helped the structure to remain current on the rated notes. The available liquidity reserves are at their respective target levels.

Credit-negative (-)

High (re)default risk (negative). A high proportion of the loans were restructured in the past or are currently being restructured. Scope’s lifetime portfolio default rate distribution captures high expected defaults, indicated by the higher risks from reperforming loans as well as the uncertainty from those loans which are currently three months in arrears and may not become reperforming.

Volatile property market (negative). Scope remains uncertain regarding Ireland’s property market, reflected in relatively high property haircuts. Nevertheless, expected recoveries given default are quite high due to the relatively moderate leverage of the portfolio (recoveries of 77% and 45% for B and AAA respectively).

Limited excess spread (negative). The transaction’s excess spread is low and due to the credit quality of the obligors also volatile, which limits the usefulness of principal deficiency ledgers and makes the transaction rely more on reserve funds.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 17 December 2021; Methodology for Counterparty Risk in Structured Finance, 13 July 2021) are available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Sebastian Dietzsch, Director

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