Rating action

Scope Ratings GmbH (Scope) has taken the following rating actions on the instruments issued by Warrington Residential 2022-1 DAC:

Class A1 (ISIN XS2439881108), EUR 82.9m outstanding: downgraded to A_SF from A+_SF

Class A2 (ISIN XS2439881280), EUR 22.8m outstanding: downgraded to BBB-_SF from BBB+_SF

Class B (ISIN XS2439881447), EUR 10.0m outstanding: downgraded to BB-_SF from BB+_SF

Class C (ISIN XS2439881520), EUR 8.7m outstanding: downgraded to B-_SF from B+_SF

Class Z1 (ISIN XS2439881876), EUR 32.6m outstanding: not rated

Class Z2 (ISIN XS2439882171), EUR 128.3m outstanding: not rated

Class X (ISIN XS2440298680), EUR 2.0m outstanding: not rated

Transaction overview

The transaction is a EUR 403.3m true-sale securitisation of non-performing residential mortgages in Ireland. The transaction closed on 22 February 2022.

Classes A1 to Z2 will amortise in full sequential order with respect to portfolio collections in the normal course of portfolio amortisation and the realisation of proceeds from foreclosure properties. Proceeds from the sale of re-performing mortgages will be shared among the rated notes based on a predetermined share at closing.

The transaction is currently serviced by Mars Capital as servicer, with U.S. Bank Europe DAC acting as the account bank. Morgan Stanley & Co. International plc serves as the arranger, interest rate cap counterparty and lead manager.

Relevant changes to the key transaction features

Relative to closing, the structure has weakened, primarily due to the slower-than-expected pace of collections, with the servicer’s cumulative collection ratio currently at approximately 69%.

The upcoming expiration of the cap agreement in February 2026 will remove the benefit of cap proceeds under the interest rate hedge. While the contractual coupon cap will provide partial mitigation against rising interest costs, the transaction is expected to face higher expenses once the additional note payment margin becomes effective.

There have not been material changes to the transaction’s counterparties, and no significant changes to Scope’s assessment of counterparty risk.

Rating rationale

The rating action follows: i) the periodic re-assessment of the transaction´s key rating drivers, ii) a review of its key assumptions, considering the observed performance of the collateral and Scope’s economic outlook, and iii) any material changes to the key transaction features (portfolio composition, structural features, counterparties).

The rating downgrade is primarily driven by the slower-than-expected pace of collections, which has resulted in delayed amortisation of the notes and higher costs compared to Scope’s B case assumptions at closing. Scope expects the slowdown in collections to persist, reflecting the servicer’s strategic shift from converting NPLs into reperforming loans to resolving exposures through litigation. In addition, the expiration of cap proceeds and the introduction of additional note margin payments further increase cost pressures on the transaction.

Key rating drivers

The key rating drivers have evolved since the initial rating action release dated 22 February 2022. Scope has made the changes listed below to the transaction’s key rating drivers. Other drivers remain unchanged.

Frequent payers in the portfolio (positive). Scope no longer considers frequent payers a positive rating driver, given that the portfolio is now largely composed of assets under litigation and shows limited potential for portfolio sales.

Regulatory work-out process (positive). Scope no longer views the regulatory work-out process as a positive rating driver, as a significant portion of the portfolio requires property foreclosures rather than amicable workout solutions.

None of the key rating drivers are ESG related.

Key analytical assumptions¹

• Rating-conditional lifetime gross recovery rates
   
• Rating-conditional recovery timing vectors

The analytical assumptions incorporate the transaction’s historical performance and peer transaction benchmarks. They may also reflect qualitative judgments based on various factors, including (a) the servicer’s recovery strategies, (b) Scope’s macroeconomic expectations, and (c) the credit committee’s outlook for the asset class over the transaction’s remaining lifetime.

Updates to these assumptions and other parameters are provided under the section ‘Quantitative analysis’.

Key performance metrics

As of the last collection date, aggregate gross collections were EUR 130.7m, which represents 69% of the original business plan expectations. The breakdown of collections is as follows: proceeds from redemptions (45.6%), proceeds from portfolio sales (32.9%), proceeds from on-going collections (20.8%) and other sources (0.7%).

There has been no business plan revision since closing.

Key data sources

Scope’s review was based on servicer, investor and payment reporting as of October 2025 payment date. Scope also considered the macro-economic and NPL sector context reflected in the 2025 structured finance outlook.

Rating-change drivers

A change to the key quantitative assumptions based on observed performance or new data sources, significant changes to the key transaction´s features, and a change in Scope’s credit views regarding the key rating drivers could impact the ratings.

Sensitivity analysis

This analysis is solely intended to illustrate the sensitivity of the credit rating to the assumed parameters and, all else being equal, does not reflect expected or likely scenarios.

• 10% haircut to gross recoveries: two notches for class A1, four notches for class A2, about five notches for class B, about two notches for class C.
   
• One-year increase of recovery lag: zero notches for class A1, one notch for class A2, one notch for class B, about two notches for class C.

Quantitative analysis

The following key quantitative parameters have changed since closing:

• Lifetime recovery rate at B case has been revised to 69% (65% at closing) over a weighted average life of 3.6 years (2.8 years at closing).
   
• Rating conditional interest rate vectors: as disclosed in Scope´s General Structured Finance Rating Methodology.

Rating driver references
1. Transaction reporting (Confidential)

Stress testing
Stress testing was performed by applying Credit-Rating-adjusted recovery rate assumptions.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction with the use of Scope Ratings’ Cash Flow Model Version 2.2 incorporating relevant asset assumptions and taking into account the transaction’s main structural features, such as the instruments’ priority of payments, the instruments’ size and coupons. The outcome of the analysis is an expected loss rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodologies used for these Credit Ratings (Non-Performing Loan ABS Rating Methodology, 1 August 2025; Counterparty Risk Methodology, 30 June 2025; General Structured Finance Rating Methodology, 13 February 2025), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings is (Cash Flow Model Version 2.2), available in Scope Ratings’ list of models, published under scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, the Rated Entities’ Related Third Parties, third parties and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Scope Ratings has received a third-party asset due diligence assessment/asset audit at closing. The external due diligence assessment/asset audit was considered when preparing the Credit Ratings and it has no impact on the Credit Ratings.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and the principal grounds on which the Credit Ratings are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings are UK-endorsed.
Lead analyst: Elom Kwamin, Senior Analyst
Person responsible for approval of the Credit Ratings: Paula Lichtensztein, Senior Representative
The final Credit Ratings were first assigned by Scope Ratings on 22 February 2022. The Credit Ratings were last updated on 19 January 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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