OREANDA-NEWS. Fitch Ratings has assigned Duncan Funding 2015-1 plc's notes final ratings, as follows:

GBP1,200,000,000 Class A1: 'AAAsf', Outlook Stable
EUR300,000,000 Class A2a: 'AAAsf', Outlook Stable
GBP487,300,000 Class A2b: 'AAAsf', Outlook Stable
GBP72,700,000 Class B: 'AA+sf', Outlook Stable
GBP31,100,000 Class C: 'Asf', Outlook Stable
GBP72,700,000 Subordinated note: not rated

The transaction is a securitisation of UK prime residential owner-occupied mortgages originated by TSB Bank plc (TSB) or acquired from Lloyds Banking Group (LBG). TSB was divested from LBG and launched in September 2013; it was subsequently taken over by Banco de Sabadell in 2015. The weighted average seasoning for the pool is 3.6 years, with the majority of the loans having been originated between 2012 and 2015.

KEY RATING DRIVERS
Prime Portfolio
The portfolio has a weighted average (WA) seasoning of 3.6 years, a WA sustainable loan-to-value ratio (SLTV) of 75.74% and WA debt-to-income (DTI) of 38.24%. The WA SLTV and WA DTI are below the average for UK prime transactions rated by Fitch.

Revolving Transaction
A five-year revolving period will allow new assets to be added to the portfolio. Fitch considers the replenishment criteria will help mitigate any significant risks about the potential migration of the portfolio's credit profile. Nonetheless, Fitch has assumed changes to the portfolio characteristics, in line with the replenishment criteria listed in the transaction documentation.

Class A1 Scheduled Amortisation
Principal for the class A1 notes will be paid in the first instance according to a target scheduled amortisation. Any excess principal collections, above the target scheduled amortisation, will be used to purchase new assets into the pool. If principal collections are not enough to meet the target scheduled amortisation, then the shortfall amounts can be drawn, at their discretion, by the subordinated noteholder or will be carried forward.

Collection Account Bank
The collection account bank provider, Lloyds Bank plc, does not have a replacement trigger in-line with Fitch's criteria. Fitch has assumed a total loss of one month's worth of scheduled principal and interest to account for funds lost due to insolvency of the collection account bank.

RATING SENSITIVITIES
The assigned ratings and the related analysis performed are based on the assumptions in the existing criteria - Criteria Addendum: UK, dated 11 June 2015. Fitch's exposure draft report - Exposure Draft - Criteria Addendum: UK, dated 22 September 2015 has not been adopted (and the related model has not been through the full validation process), and these were not used in the rating analysis. Fitch has performed a sensitivity analysis which shows that if the criteria in that Exposure Draft (and the related model) were used, the assigned ratings would be:

Class A1: 'AAA'
Class A2a: 'AAA'
Class A2b: 'AAA'
Class B: 'AAA'
Class C: 'AA'

Material increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels greater than Fitch's base case expectations, which in turn may result in negative 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 imply a downgrade of the class A notes to 'AAsf' from 'AAAsf', the class B notes to 'Asf' from 'AA+sf', and the class C notes to 'BBB+sf' from 'Asf'.

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

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
TSB provided Fitch with a loan-by-loan data template. All relevant fields were provided in the data tape, with the exception of prior mortgage arrears. TSB was unable to provide data on prior arrears, since this was not recorded on the systems. However, TSB confirmed that since January 2014, only 0.1% of loans by volume had any prior arrears six months prior to completion of the mortgage. Fitch conservatively assumed that 1% of the pool had prior arrears (one month) up to six months before origination.

Fitch received performance data including loans 3m-plus in arrears, for the total TSB book, covering vintages from 2006 to 2014. This period covers the years in which the majority of the loans were originated. TSB was also able to provide dynamic arrears data for the current TSB portfolio. The data used to calculate arrears includes accounts that were either migrated to TSB or, if closed before migration, accounts that, according to the probability of divestment model used by TSB, would have migrated into the TSB book if they had remained open. The data showed performance to be in line with comparable prime lenders.

During the previous 12 months, Fitch conducted a site visit to TSB's offices and a file review to check the quality of TSB's originations. During the site visit, Fitch 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.

Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

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. Fitch rates the notes to the terms and conditions of the notes, which states that interest can be deferred on the class B to class C notes provided that any such note is not the most senior class outstanding; Fitch always rates notes 'AA' or above for timely interest. However, Fitch's rating scenarios indicate that the class A to class C notes receive interest payments in our modelling scenarios without incurring any interest shortfall at any time.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by TSB as at 30 October 2015
- Transaction reporting provided by TSB for Cape Funding No.1 plc as at 21 September 2015
- Loan enforcement details provided by TSB as at 23 July 2015
- Loan performance data provided by TSB as at 23 July 2015