Rating Action Commentary
ֳ Upgrades Trinity Square 2021-1
Thu 23 Dec, 2021 - 10:52 AM ET
ֳ - London - 23 Dec 2021: ֳ has upgraded Trinity Square 2021-1's class C and X notes and affirmed the rest. The class X, F and G notes have been removed from Rating Watch Positive (RWP). A full list of ratings is detailed below.
Transaction Summary
Trinity Square 2021-1 is a securitisation of legacy owner-occupied (OO) and buy-to-let (BTL) mortgages originated by GE Money Home Lending Limited and GE Money Mortgages Limited. The transaction is a refinancing of the Trinity Square 2015-1 Plc and Trinity Square 2016-1 Plc issuance.
KEY RATING DRIVERS
Off RWP: The class F, G and X notes have been removed from the RWP assigned in July 2021, following the retirement of ֳ's coronavirus-related additional stress scenario analysis for BTL assets (see 'ֳ Retires UK and European RMBS Coronavirus Additional Stress Scenario Analysis, except for UK Non-Conforming' dated July 2021 on ).
The retirement of the additional stress analysis is the result of improved macroeconomic forecasts, the limited performance deterioration observed so far, and our expectation that the stress included in our asset assumptions is sufficient to account for the remaining uncertainty related to the Covid-19 pandemic. As the proportion of BTL loans is small at 5%, the retirement of these assumptions has contributed to the upgrades, but it is not the main driver.
Increasing Credit Enhancement: The transaction has begun to amortise sequentiaily, allowing credit enhancement (CE) to build up. The upgrade of the class C notes reflects increased CE, as it can now withstand losses commensurate with the higher rating. The Positive Outlook on the class F notes also reflects better-than-expected CE trends, mostly related to material prepayment rates observed to-date.
Stable Asset Performance: Asset performance has remained stable since closing in March 2021. One-month plus arrears were 5.9% as of September 2021, versus 6.2% as of April 2021 while three-month plus arrears have remained at 3.8% across the same period. Hence, excess spread continues to be robust and can be used to repay the class X notes, in excess of our original projections, resulting in today's upgrade.
Foreclosure Frequency Macroeconomic Adjustments: ֳ applied foreclosure frequency (FF) macroeconomic adjustments to the OO non-conforming sub-pool, because of our expectation of temporary mortgage under-performance (see 'ֳ to Apply Macroeconomic Adjustments for UK Non-Conforming RMBS to Replace Additional Stress' dated September 2021 on ). The end of the government's repossession ban has resulted in renewed uncertainty over borrowers' performance in the UK non-conforming sector, where many borrowers have already rolled into late arrears over recent months. Borrowers' payment ability may also be challenged with the end of the coronavirus job retention scheme and self-employed income support scheme. The adjustment is 1.59x at 'Bsf' while no adjustment is applied at 'AAAsf' as we deem assumptions sufficiently remote at this level.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The transaction's performance may be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce CE available to the notes.
Additionally, unanticipated declines in recoveries could also result in lower net proceeds, which may make certain notes susceptible to possible negative rating action, depending on the extent of the decline in recoveries.
ֳ conducts sensitivity analyses by stressing both a transaction's base-case FF and recovery rate (RR) assumptions, and examining the rating implications on all issued notes. We tested a 15% increase in the weighted average (WA) FF and a 15% decrease in the WARR. The ratings on the subordinated notes could be downgraded by up to six notches as a result.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and, potentially, upgrades. ֳ tested an additional rating sensitivity scenario by applying a decrease in the WAFF of 15% and an increase in the WARR of 15%. The ratings on the subordinated notes could be upgraded by up to six notches as a result.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit /site/re/10111579.
CRITERIA VARIATION
ֳ conducted additional analysis to assess the class F, G and X notes' ratings in scenarios where it did not apply asset margin compression, due to its absence since Trinity Square 2015-1 Plc and Trinity Square 2016-1 closing. This constitutes a criteria variation with respect to the standard ֳ assumption applied as part of its cash flow analysis.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, ֳ in relation to this rating action.
DATA ADEQUACY
ֳ has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. ֳ has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Prior to the transaction closing, ֳ reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis.
Prior to the transaction closing, ֳ conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.
Overall, and together with any assumptions referred to above, ֳ's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Trinity Square 2021-1 has an ESG Relevance Score of '4' for Customer Welfare - Fair Messaging, Privacy & Data Security, due to the pools exhibiting an interest-only maturity concentration of legacy non-conforming OO loans of greater than 20%, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
Trinity Square 2021-1 has an ESG Relevance Score of '4' for Human Rights, Community Relations, Access & Affordability, due to a significant proportion of the pools containing OO loans advanced with limited affordability checks, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on ֳ's ESG Relevance Scores, visit
Additional information is available on
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
- Multi-Asset Cash Flow Model, v2.11.0 (1)
- ResiGlobal Model: UK, v1.3.3 (1)
- UK RMBS FF Model, v1.1.0 (1)
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
| Trinity Square 2021-1 | UK Issued, EU Endorsed |