Overview
- Following our review of Shawbrook Mortgage Funding 2022-1 PLC, we raised our ratings on the class D-Dfrd, E-Dfrd, and F-Dfrd notes. We affirmed our ratings on all other classes of notes.
- Credit performance has been strong, exhibited by low arrears while the transaction has deleveraged.
- Shawbrook Mortgage Funding 2022-1 PLC is backed by a mortgage pool of buy-to-let residential mortgage loans originated by Shawbrook Bank PLC located in England, Wales, and Scotland.
LONDON (S&P Global Ratings) Feb. 13, 2024--S&P Global Ratings today raised to 'AA- (sf)' from 'A+ (sf)', 'A- (sf)' from ' BBB+ (sf)', and 'B- (sf)' from 'CCC (sf)' its credit ratings on Shawbrook Mortgage Funding 2022-1's class D-Dfrd, E-Dfrd, and F-Dfrd notes, respectively. We also affirmed our 'AAA (sf)' rating on the class A notes, 'AA+ (sf)' rating on the class B-Dfrd notes, and 'AA (sf)' rating on the class C-Dfrd notes.
The rating actions address our full analysis of the most recent transaction information we have received and the transaction's structural features.
Total arrears have risen since closing to 1.5%, but have been consistently below our U.K. buy-to-let index.
We applied our global RMBS criteria in our analysis of this transaction. Our weighted-average foreclosure frequency assumptions slightly decreased at the 'AAA' to 'A' rating levels and marginally increased at 'BBB' and below due to higher arrears, while benefitting from a lower effective loan-to-value (LTV) ratio and higher seasoning. Our weighted-average loss severity assumptions significantly decreased at all rating levels, owing mainly to the lower current LTV ratio.
Table 1
Credit analysis results | ||||||
---|---|---|---|---|---|---|
Rating level | WAFF (%) | WALS (%) | ||||
AAA | 20.92 | 43.23 | ||||
AA | 14.32 | 35.97 | ||||
A | 10.88 | 23.68 | ||||
BBB | 7.62 | 16.49 | ||||
BB | 4.18 | 11.66 | ||||
B | 3.40 | 7.56 | ||||
WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity. |
Our credit analysis showed a decrease in the required credit coverage for all rating levels.
Available credit enhancement in this transaction has increased since closing (except for the class F-Dfrd notes), due to the deleveraging and the sequential amortization of notes.
Operational, counterparty, and legal risks continue to be adequately mitigated, in our view, and do not constrain our ratings on the notes. We also performed a sensitivity analysis for deterioration in credit performance such as an increase in defaults, and a longer recovery period.
Our credit and cash flow results indicate the available credit enhancement for the class D-Dfrd and E-Dfrd notes is commensurate with higher ratings than those currently assigned. We therefore raised to 'AA- (sf)' from 'A+ (sf)', and to 'A- (sf)' from 'BBB+ (sf)' our ratings on the class D-Dfrd and E-Dfrd notes, respectively. The assigned ratings (lower than the standard cash flow runs) reflect the notes' sensitivity to higher arrears and that the majority of loans are interest-only and may represent a long-term risk to borrowers' ability to repay their mortgages.
Under our credit and cash flow analysis, the class F-Dfrd notes continue to fail at a 'B' stress level in our base-case scenario, but attain a rating under our steady state scenario (expected prepayment and contractual fees). Debt servicing for this class of notes does not depend on favorable economic and financial conditions. We therefore apply our 'CCC' ratings criteria, and raised our rating on this class of notes to 'B- (sf)' from 'CCC (sf)'.
We affirmed our 'AAA (sf)' rating on the class A notes to reflect our credit and cash flow analysis, which indicated the rating remains robust.
Our credit and cash flow results indicate the available credit enhancement for the class B-Dfrd and C-Dfrd notes is now commensurate with a higher rating. However, we affirmed our 'AA+ (sf)' rating on the class B-Dfrd notes as the deferred payment of interest on the notes is not commensurate with our ratings definition of 'AAA (sf)'. Given the difference in credit enhancement and seniority compared to the class B-Dfrd notes, we affirmed our 'AA (sf)' rating on the class C-Dfrd notes.
Shawbrook Mortgage Funding 2022-1 PLC is backed by a mortgage pool of buy-to-let residential mortgages located in England, Wales, and Scotland.
Related Criteria
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct. 18, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- General Criteria: Methodology Applied To Bank Branch-Supported Transactions, Oct. 14, 2013
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009
Related Research
- European RMBS Index Report Q4 2023, Feb. 9, 2024
- European Structured Finance Outlook 2024: Pushing On Through, Jan. 9, 2024
- U.K. Economic Outlook 2024: More Stagflation Ahead, Nov. 27, 2023
- Scenario Analysis: How Much Shock Can U.K. RMBS Take?, March 1, 2023
- Servicer Evaluation: Pepper (U.K.) Ltd., March 1, 2022
- ESG Industry Report Card: Residential Mortgage-Backed Securities, March 31, 2021
- 2017 EMEA RMBS Scenario And Sensitivity Analysis, July 6, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
Primary Credit Analyst: | Arnaud Checconi, London + 44 20 7176 3410; ChecconiA@spglobal.com |
Research Contributor: | Manoj Pandey, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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