primrose residential 2021-1 dac

Presale:

Primrose Residential 2021-1 DACApril 28, 2021

Preliminary Ratings

ClassPrelim.rating*

Class size(%)

Credit enhancement(%)§ Interest

Step-upmargin Step-up date

Legal finalmaturity

A AAA (sf) 77.25 24.75 1ME + amargin

1ME + amargin

May 2024 March 2061

B-Dfrd AA (sf) 6.50 18.25 1ME + amargin

1ME + amargin

May 2024 March 2061

C-Dfrd A (sf) 4.75 13.50 1ME + amargin

1ME + amargin

May 2024 March 2061

D-Dfrd BBB (sf) 3.50 10.0 1ME + amargin

1ME + amargin

May2024 March 2061

E-Dfrd BB (sf) 3.50 6.50 1ME + amargin

1ME + amargin

May 2024 March 2061

F-Dfrd B (sf) 1.50 5.00 1ME + amargin

1ME + amargin

May 2024 March 2061

G-Dfrd B- (sf) 1.25 3.75 1ME + amargin

1ME + amargin

May 2024 March 2061

RFN NR 2.00 N/A 1ME + amargin

1ME + amargin

May 2024 March 2061

Z-Dfrd NR 1.75 N/A 1ME + amargin

1ME + amargin

May 2024 March 2061

X NR TBD N/A N/A N/A N/A March 2061

Y NR TBD N/A Fixed rate N/A N/A March 2061

Note: This presale report is based on information as of April 28, 2021. The ratings shown are preliminary. Subsequent information may result inthe assignment of final ratings that differ from the preliminary ratings. We expect to assign final credit ratings on the closing date subject to asatisfactory review of the transaction documents and legal opinions. Accordingly, the preliminary ratings should not be construed as evidenceof final ratings. This report does not constitute a recommendation to buy, hold, or sell securities.*Our ratings address timely receipt of interest and ultimate repayment of principal on the class A notes and the ultimate payment of interestand principal on the other rated notes. Our preliminary ratings on the class B-Dfrd to G-Dfrd notes also address the payment of interest basedon the lower of the stated coupon and the net weighted-average coupon.§Credit enhancement is calculated based on subordination and a reserve fund. 1ME--One-month EURIBOR. Dfrd--Deferrable. NR--Not rated.N/A--Not applicable. TBD--To be determined.

Presale:

Primrose Residential 2021-1 DACApril 28, 2021

PRIMARY CREDIT ANALYST

Sinead Egan

Dublin

+ 353 1 568 0612

[email protected]

www.standardandpoors.com April 28, 2021 1

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimeron the last page.

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mailto: [email protected]

mailto: [email protected]

Overview

- S&P Global Ratings has assigned preliminary ratings to Primrose Residential 2021-1 DAC'sclass A to G-Dfrd Irish RMBS notes. At closing, the transaction will also issue unrated classRFN, Z, X, and Y notes.

- Primrose Residential 2021-1 is a static RMBS transaction that securitizes a portfolio of loanstotaling €869.8 million. The portfolio consists of performing and reperforming owner-occupiedand buy-to-let mortgage loans secured over residential properties in Ireland.

- The securitization comprises two purchased portfolios, which were previously securitized intwo different RMBS transactions, ERLS 2019 PL1 and Grand Canal Securities 1 (GCS1). Theyaggregate assets from three Irish originators. The loans in the ERLS 2019 PL1 subpool wereoriginated by Permanent TSB PLC, and the loans in the GCS1 subpool were originated by IrishNationwide Building Society and Springboard.

- Our rating on the class A notes addresses the timely payment of interest and the ultimatepayment of principal. Our ratings on the class B to G-Dfrd notes address the ultimate paymentof interest and principal. The timely payment of interest on the class A notes is supported bythe liquidity reserve fund, which was fully funded at closing to its required level of 2.0% of theclass A notes' balance. Furthermore, the transaction benefits from the ability to use principal tocover certain senior items.

- Start Mortgages DAC and Mars Capital Finance Ireland DAC, the administrators, areresponsible for the day-to-day servicing. In addition, the issuer administration consultant,Hudson Advisors Ireland DAC, helps devise the mandate for special servicing, which is beingimplemented by Start.

- At closing, the issuer will use the issuance proceeds to purchase the beneficial interest in themortgage loans from the seller. The issuer grants security over all its assets in favor of thesecurity trustee. We consider the issuer to be bankruptcy remote under our legal criteria.

- There are no rating constraints in the transaction under our structured finance operational,sovereign and counterparty risk criteria.



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Presale: Primrose Residential 2021-1 DAC

Transaction Key Features*

Expected closing date May 2021

Note payment frequency Monthly

Collateral Performing and reperforming first-lien Irish owner-occupied mortgage loans andbuy-to-let mortgages

Sources of credit enhancement Initial subordination and non-liquidity reserve fund ledger

Outstanding principal of theprovisional pool

€864.7 (excluding for the purpose of our analysis €5.1 million of loans past maturityand loans subject to future write-off)

Country of origination Ireland

Concentration Dublin: 33.4%

Property occupancy 58.4% owner-occupied, 41.6% buy-to-let

Deferral Class B to Z notes

Coupon (on the class B-Dfrd to G-Dfrdnotes)

Minimum of stated coupon and net WAC

Weighted-average original LTV ratio§ 75.3%

Weighted-average current LTV ratio§ 77.1%

Weighted-average seasoning 177 months

Arrears greater than or equal to onemonth§

8.2%

Reperforming loans 43.6%

Ever in COVID-19 moratorium 18.6%

Asset redemption profile 44.6% repayment, 55.4% interest-only and part and part

Liability redemption profile Fully sequential

Reserve fund at closing 2.00%

*Data is based on a provisional pool as of Dec. 31, 2020. §Calculations are according to S&P Global Ratings' methodology.WAC--Weighted-average coupon. LTV--Loan-to-value.

The Credit Story

Strengths Concerns and mitigating factors

The capital structure provides 24.75% of availablecredit enhancement for the class A notes throughsubordination and a reserve fund.

Over half of the borrowers (60%) have had their loans restructured inthe past. In a stressed economic environment, there is increasedprobability of these borrowers going back into arrears. We haveconsidered this risk in our analysis and increased ourweighted-average foreclosure frequency (WAFF) assumptions via ourreperforming adjustment. In our analysis, we have applied ourreperforming adjustment to those loans that were restructured orwere in arrears for more than three months in the last 60 months andare currently performing (43.6%).

There will be a fully funded liquidity reserve fundand non-liquidity reserve fund at closing to meetrevenue shortfalls on the senior class and to providecredit enhancement to all rated notes.

Within the provisional pool, 8.2% of the loans are currently at leastone month in arrears. In line with our global RMBS criteria, we haveincreased our WAFF estimates accordingly to address this increasedrisk.



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The Credit Story (cont.)


Geographic concentration within the pool is limited,and there are no counties with an exposure abovethe thresholds outlined in our residential loanscriteria.

Of the portfolio, 14.2% consists of split mortgages, which we haveconsidered in our analysis of reperforming loans. Seven of these loans(€0.7 million) are subject to potential future write-offs. We haveconsidered this in our analysis by using the current balance, net ofany write-offs. At the same time, in our cash flow analysis, thewarehouse loans do not accrue any interest.

The administrators--Start Mortgages DAC and MarsCapital Finance Ireland DAC--are experiencedservicers with well-established and fully integratedservicing systems and policies. Start has alsoworked together with the issuer administrationconsultant, Hudson Advisors Ireland DAC, onprevious reperforming transactions.

Split mortgages rely on a bullet payment to be made toward thematurity of the loan if the borrower's affordability does not improveover the loan term. Of the split mortgages, 62% are secured byowner-occupied property. Given the borrowers' age profile and theterm of these loans, these borrowers may have limited refinancingoptions available at contract maturity. Also, they may be olderborrowers, making it more difficult for the servicer to repossess theproperties. We have considered this in our analysis by testing theimpact of extended recovery timing, and the ratings remain robust.

The application of principal proceeds is fullysequential. Credit enhancement can therefore buildup over time for the rated notes, enabling the capitalstructure to withstand performance shocks.

Based on our analysis of the historical property sales data provided bythe servicer on similar loans from the originator and the differencebetween updated property valuations and indexed original propertyvaluations on pools of other comparable assets, we concluded thatthere is the risk that the original property valuations may beoverstated. Considering this, along with findings from the audit reportand possible legal title issues with some of the loans (see below), wehave applied a 10% valuation haircut to the original propertyvaluations for the portfolio.

The interest rate cap hedges the exposure toliquidity risks in a rising interest rate scenario.

Of the pool, 47 loans may have a legal title issue. As this may diminishthe amount of recoveries, we have considered this risk as part of ourcredit analysis.

The structure incorporates an arrears provisioningmechanism rather than being linked solely to theloans' loss status. We consider this more positive forthe transaction than the latter, given that anyexcess spread is trapped as soon as the loan is inarrears rather than waiting until the recoveryprocess is completed. We have considered thisfeature in our cash flow analysis.

The audit report generated more errors than we typically see inEuropean RMBS transactions. We have taken this into account in ourcredit analysis through an increased originator adjustment. Inaddition, some material fields for our analysis, in particular forvaluations, were not checked against the loan documentationprimarily due to missing documentation. We have taken this intoaccount in our credit analysis through a valuation haircut as outlinedabove. (in addition, see "Data Adequacy" section below).

The pool features cross-collateralization, as there are multiple loanssecured by the same properties, one loan secured by multipleproperties, or one property linked to multiple borrowers. To accountfor these characteristics, we have considered the default risk at theborrower level (see "Asset description" section).

Of the loans in the provisional portfolio, 55.4% are interest-only loansand part-and-part loans. In our view, interest-only loans onowner-occupied properties have historically exhibited a higher defaultprobability than otherwise similar loans, and we have increased theforeclosure frequency on these type of loans on owner-occupiedproperties in our analysis in line with our criteria.

The seller and retention holder provide representations andwarranties and remedies for breach of these representations andwarranties, in the mortgage sale agreement, which we consider to beweaker than the market standard for an Irish RMBS transaction. Wehave therefore increased our foreclosure frequency estimates toaddress this risk. We have also considered the pool's high seasoningas a supporting factor in this regard.



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The Credit Story (cont.)


The notes pay one-month EURIBOR plus a margin. Of the loans in theprovisional portfolio, 60.8% are linked to the European Central Bank(ECB) tracker rate, and 4.8% are fixed-rate loans. The remaining34.4% are linked to a standard variable rate (SVR). The SVR loans arefloored at one-month EURIBOR plus 2.5%, which we considered in ourcash flow analysis. The transaction does not have a basis swap tomitigate the basis risk between the ECB tracker loans and the intereston the liabilities. We have therefore accounted for this basis risk inour analysis.

As a result of the COVID-19 pandemic, as of Dec. 31, 2020, 18.6% ofthe portfolio loans have been granted payment holidays. Of theportfolio, 0.08% are still under a payment holiday, while 17.8% havealready resumed payments. Our analysis incorporates stresses tocapture the risk of payment holidays rolling into arrears (see"Payment holidays and the impact of COVID-19" section below). Theratings assigned remain robust.

COVID-19: Our credit and cash flow analysis and related assumptionsconsider the transaction's ability to withstand the potentialrepercussions of the coronavirus outbreak, namely, higher defaults,longer recovery timing. Considering these factors, we believe that theavailable credit enhancement is commensurate with the ratingassigned. As the situation evolves, we will update our assumptionsand estimates accordingly.

Collateral Summary

We have received loan-level data as of Dec. 31, 2020. The preliminary pool of €869,806,644comprises 6,216 loan parts originated by those listed in table 1.



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Table 1

Originators

Originator Outstanding balance (%)

PTSB 72.5

Irish Nationwide BS 15.0

Springboard 12.4

Chart 1

The assets are first-ranking owner-occupied and buy-to-let mortgage loans secured againstproperties in Ireland. Only the portion of the portfolio originated by Springboard was originated asnonconforming loans; the rest of the portfolio was originated as prime. However, Irish mortgageperformance was significantly impacted by rising unemployment in the aftermath of the globalfinancial crisis, and the performance of the loans originated as prime was also impacted.

In our analysis, the total secured pool balance is €864,724,683. We have excluded €5,085,902 ofloan balances past maturity and loans subject to potential write-off from our analysis; however,we have given recovery benefit to the loans past maturity in our cash flow analysis.

Data adequacy

We have received historical arrears performance data for the GCS1 loans in the portfolio since2011 and since 2014 for ERLS 2019 PL1, details of all restructurings in the portfolio, and paymentrate data since 2011. The historical data for the ERLS 2019 PL1 subpool spans a relatively benigneconomic environment given that most of the pool was originated before 2008. We haveconsidered this in our credit analysis by increasing our originator adjustment.

Based on our analysis of historical property sales data provided by the servicer on similar loansfrom the originators and the difference between updated property valuations and indexed originalproperty valuations on pools of other comparable assets, we concluded that there is the risk thatthe original property valuations may be overstated.

In addition, both subpools were audited by a third-party due diligence provider. Due todocumentation limitations, in particular with the valuation reports, the scope was more limitedthan we typically see in the Irish market.

In order to address this, along with the factors above, we have applied a 10% valuation haircut tothe original property valuations in this portfolio. We also received supplementary information fromthe servicer on the missing reports (including a further review where a sample of these reportswere available), which helped aid our conclusion that the data provided and our assumptions aresufficiently robust.



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We have also addressed the errors in the audit report through a pool-level adjustment to ourWAFF.

Table 2

Collateral Key Features*

Primrose Residential2021-1 DAC

Shamrock Residential2019-1 DAC

Jepson Residential2019-1 DAC

Pool cut-off date Dec. 31, 2020 Jan. 31, 2019 Feb. 28, 2019

Jurisdiction Ireland Ireland Ireland

Principal outstanding of the pool (€) 864,724,683 336,564,705 616,730,597

Number of loan part 6,163 1,711 2,560

Average loan balance (€) 200,260 196,706 230,467

Weighted-average indexed currentLTV ratio (%)

77.1 78.83 73.40

Weighted-average original LTV ratio(%)

75.3 81.09 72.22

Weighted-average seasoning(months)

177 152 150

Self-certified loans (%)§ 8.21 10.23 13.91

Interest-only and part and part (%) 55.4 25.39 46.20

Buy-to-let (%) 41.6 7.02 4.83

Jumbo valuations (%) 7.1 22.75 33.46

'AAA' RMVD (%) 54.55 54.55 54.55

Current arrears > one month (%) 8.19 8.63 13.38

Historical restructures (%) 60 68 71

*Calculations are according to S&P Global Ratings' methodology. §We did not receive data for all of the loans in the pool. These amounts arebased on the available data. LTV--Loan-to-value. RMVD--Repossession market value declines.

Asset description

The portfolio's weighted-average current indexed loan-to-value (LTV) ratio is 77.1%, and theweighted-average original LTV (OLTV) is 75.3% (see chart 2).

We have capped the OLTV ratio at the borrower level at 100% because the loan underwritingcriteria at origination did not allow lending above 100%.

The weighted-average CTLV ratio of 77.1% is based on our methodology and incorporates the 10%valuation haircut.

We consider that borrowers with minimal equity in their property are more likely to default on theirobligations than borrowers with lower original loans. At the same time, loans with high current LTVratios are likely to incur greater loss severities if the borrower defaults.



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Chart 2

Approximately 55.4% of loans are interest-only or part and part loans, with 18.3% of the portfoliointerest-only or part and part on owner-occupied properties. In our view, interest-only loans onowner-occupied properties have historically exhibited a higher default probability than otherwisesimilar loans. Additionally, split mortgages rely on a bullet payment to be made toward thematurity of the loan if the borrower's affordability does not improve over the loan term. Theborrower may not be able to sell the property at that time. We have increased the foreclosurefrequency of these loans. At the same time, given the borrowers' age profile and the loans' terms,some of these borrowers may be older borrowers when the warehouse portion is due, making itdifficult for the servicer to repossess the house. We have considered this in our analysis by testingthe impact of extending the time to recovery.

The weighted-average seasoning of the portfolio is 177 months, but this is offset by the fact thatwe have not given any benefit to the seasoning of loans that have been classified as reperformingin the past five years.

In line with other Irish portfolios, the assets are primarily concentrated in Dublin (33.4%), but nocounties breach our concentration limits.

The seller is a special-purpose entity. It did not originate the loans, and it has limited resources tomeet its financial obligations. While the seller provides certain representations and warranties onthe assets, its responsibility to indemnify the issuer is limited. We consider the seller'sresponsibility for in case of a breach to be weaker than what we normally see in European RMBStransactions, and we have increased the originator adjustment to incorporate this risk. We havealso considered the pool's high seasoning as a supporting factor in this regard



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Chart 3

The proportion of the provisional pool with jumbo valuations is 7.1%. Due to the illiquid nature oflarger valued properties, these loans may suffer an additional market value decline, in our view. Aproperty is classified as jumbo under our criteria if in excess of €750,000 for Dublin properties and€500,000 for properties outside Dublin.

Asset performance

Mortgage arrears in Ireland increased steadily from the beginning of 2009 until 2013 after theonset of the global financial crisis. Since the peak, total delinquencies have halved, partly drivenby the improving economic environment, but also reflecting implementation of the Central Bank ofIreland's Mortgage Arrears Resolution Process (MARP), which was first introduced in 2011.

While we have received six years of data (from 2014 to 2020) for the ERLS 2019 PL1 portfolio, thisspans a relatively benign economic environment, given that most of the pool was originated before2008, and therefore, we have limited visibility on when the arrears peaked (see chart 5 below).



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Although the data provided meets our minimum requirements, we have accounted for the lack ofperformance history during the recessionary period in the Irish mortgage market in our originatoradjustment. For the GCS1 portfolio, we have historical data since 2011, and thus it incorporatesthe rise in arrears after the financial crisis (see chart 5 below).

Reperforming analysis

Of the portfolio, 43.8% of loans are classified as reperforming under our criteria, and we increasedour weighted-average foreclosure frequency (WAFF) assumptions for these assets based on thedate when the loan was last 90 days or more in arrears or restructured over the last 60 months, inline with our criteria.

When a restructuring arrangement occurred, it included a full reassessment of the borrower'saffordability. We have therefore calculated our seasoning credit on these loans based on the datea loan was last 90 or more days in arrears or restructured. We have considered those borrowersunder an active personal insolvency agreement or one that occurred in the last five years asrestructured.

Portfolio sub pool summary

The GCS1 pool, which represents 27.5% of the preliminary pool, was originated by a combinationof Irish Nationwide Building Society and Springboard. Arrears in the GCS1 portfolio peaked at23.3% in April 2013, and have since reduced, aided by restructuring agreements. Of the GCS1portfolio, 17.5% has been restructured, with 85% of these carried out between 2013 and 2016.Thus, there is data available on performance since structure.

The ERLS 2019 PL1 portfolio comprises primarily reperforming loans originated by Permanent TSBPLC. It represents 72.5% of the preliminary pool.

Arrears in the ERLS 2019 PL1 portfolio were 48% at the first available data point in April 2014.Since then, arrears have been decreasing due to restructuring arrangements and an enhancedservicing strategy. Of this subpool, 76.1% have been restructured, with over 50% of theserestructures between 2017-2019, and thus there is less performance data availablepost-restructure than for the GSC1 portfolio.



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Chart 4



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Chart 5

Of the loans in the total preliminary pool, 8.2% is now currently in arrears of greater than onemonth, and approximately 60% of the loans in the combined pool have been restructured (seechart 4). A long-term split arrangement--where the largest cohort of the loan is on a fullrepayment trajectory, with the smaller tranche on an interest-only arrangement--is a commonforbearance treatment for owner-occupied mortgages in the pool. The interest-only arrangementis reviewed at regular intervals, and step-ups in repayment are sought as a means of achieving fullrepayment without relying on the sale of the underlying collateral at maturity.

Some of these split mortgages incorporate future write-off agreements if the borrower remainscurrent. In our cash flow analysis, we have considered this by reducing the collateral balance.

The payment rate for the portfolios has remained high, with an average pay rate above 90% overthe last three years, despite the portion of borrowers that were in arrears and subsequentlyrestructured (see chart 6). The pay rate data shows a decrease in second-quarter 2020 due to theimpact of COVID-19 payment holidays, but this has since reverted to previous levels.

We have considered the potentially vulnerability of these loans to increased defaults due to theimpact of COVID-19 in our analysis (see "Macroeconomic and sector outlook" section below).



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Chart 6

Servicer

Two administrators will provide the day-to-day operational servicing capabilities for thistransaction. Start Mortgages will administer the ERLS 2019 PL1 portfolio, and Mars Capital willadminister the GCS1 portfolio. In addition to the administrators, the issuer appointed the issueradministration consultant, Hudson Advisors Ireland DAC, to provide consulting services for theStart administrator.

The administrators and the issuer administration consultant together will implement the servicingbusiness strategy for the loans in this transaction. The servicing strategy for these loans is toproactively use restructuring techniques as outlined under the Central Bank of Ireland's MortgageArrears Resolution Process to help cure borrowers struggling to make their payments and those inlong-term arrears. These restructures will include reduced payments, term extensions, andeventual arrears capitalizations.

A large portion of both portfolios has already gone through a permanent restructure consideringborrowers' circumstances. Should these restructure agreements fail, and a sustainable solutionnot be available, the servicing strategy for both servicers aims to realize the real estate value inthe most efficient manner available.

Both Start and Mars Capital are experienced servicers in the Irish market with well-established



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and fully integrated servicing systems and policies. We have considered the ability of both toservice the portfolio under our operational risk criteria, and we are satisfied that they are capableof performing their functions in the transaction. There is no cap on the ratings on the notes froman operational risk perspective.

Credit Analysis And Assumptions

WAFF and WALS

We have applied our global residential loans criteria to the provisional pool in order to derive theweighted-average foreclosure frequency (WAFF) and the weighted-average loss severity (WALS) ateach rating level.

The WAFF and the WALS assumptions increase at each rating level because notes with a higherrating should be able to withstand a higher level of mortgage defaults and loss severity. We baseour credit analysis on the loans, the properties, and the associated borrowers' characteristics.

Table 3

Portfolio WAFF And WALS

Rating level WAFF (%) WALS (%)Credit coverage

(%)Base foreclosure frequency component for an archetypical

Irish mortgage loan pool (%)

AAA 46.17 41.74 19.27 14.00

AA 35.52 37.18 13.21 9.4

A 28.75 29.48 8.48 7.1

BBB 20.93 25.31 5.30 4.7

BB 12.82 22.41 2.87 2.4

B 10.81 19.78 2.14 1.85

WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity.



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Chart 7

Macroeconomic and sector outlook

As vaccine rollouts in several countries continue, S&P Global Ratings believes there remains ahigh degree of uncertainty about the evolution of the coronavirus pandemic and its economiceffects. Widespread immunization, which certain countries might achieve by midyear, will helppave the way for a return to more normal levels of social and economic activity. We use thisassumption about vaccine timing in assessing the economic and credit implications associatedwith the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves,we will update our assumptions and estimates accordingly.

We now expect that eurozone GDP contracted by 7.8% in 2020, up from 7.3% in our May 2020projections. See table 4 for our economic forecasts for Ireland.

Table 4

Irish Market Statistics

2019 2020e 2021F 2022F

Nominal house prices, % change y/y 0.8 1.0 2.7 4.5

Real GDP (% change) 5.57 3.42 4.0 3.6

Unemployment rate 5.0 5.6 7.0 7.0

Sources: S&P Global Ratings, Eurostat, Organization for Economic Co-operation and Development, Central Statistics Office. Y/Y--Year on year.CPI--Consumer price index. e--estimate. f--Forecast.



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http://www.spglobal.com/ratings

Based on our macroeconomic forecasts we revised the 'B' foreclosure frequency assumptions inour global residential loans criteria for Ireland's archetypal pool to 1.85% from 1.5% on May 1,2020 (see "Residential Mortgage Market Outlooks Updated For 13 European JurisdictionsFollowing Revised Economic Forecasts").

In addition, we have considered the potential increased credit effect on this pool due to COVID-19,given the assets' nature and the potential vulnerability to higher delinquencies and defaultsthrough scenario analysis with increased defaults. We have also considered the transaction'sability to withstand extended foreclosure timing assumptions, and the ratings remain robust.

As the situation evolves, we will update our assumptions and estimates accordingly.

Transaction Summary

S&P Global Ratings has assigned its preliminary credit ratings to Primrose Residential 2021-1's(Primrose 2021-1) class A notes and to the interest deferrable class B-Dfrd to G-Dfrd notes. Ourpreliminary ratings on the class B-Dfrd to G-Dfrd notes address the payment of interest based onthe lower of the stated coupon and the net weighted-average coupon. At closing, Primrose 2021-1will also issue unrated class RFN, Z, Y, and X notes.

At closing, Primrose 2021-1 will acquire the beneficial interest in the mortgage loans from theseller (Daire Residential DAC). Primrose 2021-1 will issue seven classes of rated notes (class A toG-Dfrd) to fund the purchase of the portfolio. At the same time, Primrose 2021-1 will also use theproceeds of the class RFN notes to establish the reserve fund. The issuer will grant security overall of its assets to the trustee (see chart 8). Start Mortgages and Mars Capital will hold the legaltitle to the mortgage loans on trust for the issuer, until a perfection of title event occurs.



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Chart 8

The issuer is an Irish special-purpose entity, which we assume to be bankruptcy remote for ourcredit analysis. We analyzed its corporate structure in line with our legal criteria and reviewed thetransaction legal opinion, which provides assurance as to whether the structure will achieve avalid and effective sale of assets.

We have also reviewed English and Irish law opinions and a tax opinion.

Stated coupon and net WAC

Interest will be paid monthly, beginning in June 2021.

The class A notes pay interest equal to one-month EURIBOR plus a margin with a further step-upin margin following the optional call date in May 2024. Our preliminary rating on the class A notesaddresses timely payment of interest and the ultimate payment of principal.



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The class B-Dfrd to G-Dfrd pay interest based on the lower of the coupon on the notes (one-monthEURIBOR plus a class-specific margin) and the net weighted-average coupon (WAC). Theannualized net WAC is calculated based on the interest accrued on the assets (whether it wascollected or not) during the month, less senior fees, divided by the current balance of the assets atthe beginning of the collection period. The net WAC is then applied to the outstanding balance ofthe notes in question to determine the required interest. A failure to pay the lower of theseamounts will result in interest being deferred. Deferred interest will also accrue at the lower of thetwo rates. Our preliminary ratings on the class B-Dfrd to G-Dfrd notes address the ultimatepayment of interest and principal.

Net WAC additional amounts

The net WAC additional amounts refer to the difference between the stated coupon and the netWAC where the stated coupon exceeds the net WAC. For instance, should the coupon be 2.0% andthe net WAC 1.5%, the noteholders will receive interest based on 1.5%, which is what ourpreliminary ratings address. The 0.5% difference between the coupon and the net WACconstitutes the net WAC additional amount and will be subordinated in the revenue priority ofpayments. No additional interest will accrue on the net WAC additional amount.

In our view, the initial coupons on the notes are not "de minimis", and nonpayment of theadditional note interest amounts is not considered an event of default under the transactiondocuments. Therefore, we do not need to consider these amounts in our cash flow analysis, in linewith our criteria. Our preliminary ratings do not address the repayment of such amounts.

Reserve fund

At closing, the class RFN notes' issuance proceeds will fully fund the reserve fund to its requiredamount of 2% of the class A through Z notes' closing balance, excluding the RFN notes. Thereserve fund will be split between a liquidity component and a non-liquidity component.

The required balance of the liquidity component will be the higher of 1% of the class A notes'closing balance and 2.0% of class A notes' outstanding balance, while the non-liquiditycomponent will be the difference between the reserve fund required amount and the reserve fundliquidity required amount. As the class A notes amortize, the proportion attributable to theliquidity component will decrease, while the non-liquidity component will increase--providingadditional credit enhancement to the notes.

The liquidity reserve fund may only be used to cover senior fees and the class A notes' interest.

Excess trap reserve fund

On all payment dates on or before the step-up date, excess revenue will be credited to the excesstrap reserve fund in line with the revenue priority of payments described below.

Amounts standing to the credit of the excess trap reserve fund can be used to pay any shortfalls ofnet WAC additional amounts on any of the class B to G notes, and any unpaid interest on the classRFN and class Z notes.

Principal to pay interest

In high-delinquency scenarios, there may be liquidity stresses, whereby the issuer would not have



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sufficient revenue receipts to pay interest due on senior fees or the most-senior class of notes. Tomitigate this risk, the issuer can use any existing principal receipts. The use of principal to payinterest would result in the registering of a PDL and may reduce the credit enhancement availableto the notes.

PDLs

The PDL will comprise eight subledgers, one for each of the class A to Z notes.

The PDL will be a hybrid between loss-based and default-based. Amounts will be recorded on thePDL if the portfolio suffers any losses or if the transaction uses principal as available revenuereceipts or to top up the liquidity reserve fund. A PDL will also be recorded in cases where a loangoes into arrears for more than 180 days, and if the last 12 months' interest coverage ratio wasbelow 100%, the PDL will be 20%.

If forbearance occurs and a loan becomes a split mortgage, any warehoused portion subject topotential future write-off will also be recorded as a PDL.

PDL amounts will first be recorded in the class Z notes' PDL, up to the class Z notes' outstandingamount. They will then be debited sequentially upward.

Revenue priority of payments

Table 5

Priority of Payments

Revenue priority of payments Principal priority of payments

Senior fees To top up the liquidity reserve fund

Senior servicer fees Class A notes' principal

Other senior fees Class B-Dfrd notes' principal

Issuer profit amounts Class C-Dfrd notes' principal

Class A notes' interest Class D-Dfrd notes' principal

Class A notes' PDL Class E-Dfrd notes' principal

Top up the liquidity reserve fund Class F-Dfrd notes' principal

Class B-Dfrd notes' interest Class G-Dfrd notes' principal

Class B-Dfrd notes' PDL Deferred net WAC additional amount payable on theclass B-Dfrd notes*

Class C-Dfrd notes' interest Deferred net WAC additional amount payable on theclass C-Dfrd notes*

Class C-Dfrd notes' PDL Deferred net WAC additional amount payable on classD-Dfrd notes*

Class D-Dfrd notes' interest Deferred net WAC additional amount payable on theclass E-Dfrd notes*

Class D-Dfrd notes' PDL Deferred net WAC additional amount payable on theclass F-Dfrd notes*

Class E-Dfrd notes' interest Deferred net WAC additional amount payable on theclass G-Dfrd notes*

Class E-Dfrd notes' PDL Class RFN notes' interest



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Table 5

Priority of Payments (cont.)

Revenue priority of payments Principal priority of payments

Class F-Dfrd notes' interest Class RFN notes' principal

Class F-Dfrd notes' PDL Class Z notes' interest

Class G-Dfrd notes' interest Class Z notes' principal

Class G-Dfrd notes' PDL Deferred consideration to the revenue priority ofpayments

Top up the non-liquidity reserve fund

Junior performance subordinated fees

Junior fee to the issuer administration consultant

Net WAC additional amount due and payable on the class B-Dfrdnotes*

Net WAC additional amount due and payable on the class C-Dfrdnotes*

Net WAC additional amount due and payable on the class D-Dfrdnotes*

Net WAC additional amount due and payable on the class E-Dfrdnotes*

Net WAC additional amount due and payable on the class F-Dfrdnotes*

Net WAC additional amount due and payable on the class G-Dfrdnotes*

Class RFN notes' interest

After the step-up, all revenue to principal waterfall

Class Z notes' interest

Junior performance subordinated fees not paid earlier

Up to and including the step-up date, credit the excess cash flowreserve fund ledger

Class Z notes' PDL

The class X notes' principal

Class X notes' interest

*Our preliminary ratings do not address the payment of what are termed "net WAC additional amounts" i.e., the difference between the couponand the net WAC where the coupon exceeds the net WAC. These amounts will be subordinated in the interest priority of payments.PDL--Principal deficiency ledger. WAC--Weighted-average coupon.

Class Y notes

The issuer will issue class Y notes at closing. Interest and principal on these notes will only be paidto the extent there is available funds on any date where the call option is exercised, and the pricepaid by the purchaser is greater than the amount needed to repay the class A to Z notes, alongwith all other items senior in the priority of payments. No amounts will be paid to the class Y noteson any interest payment date through transaction available funds or through the standardtransaction priority of payments.



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Hedging

The issuer in this transaction benefits from an interest rate cap with a strike rate of -0.30% for thefirst two years, 0.00% for the following year, 1.00% after 36 months, 2.00% after five years, and2.5% from year seven. The interest rate cap acts to minimize the exposure to liquidity stresses upto 10 years after closing.

Of the loans in the provisional portfolio, 60.8% are linked to the European Central Bank (ECB)tracker rate, 4.8% are fixed-rate loans, and one loan is linked to one-month EURIBOR. Theremaining 34.4% are linked to an SVR. The transaction does not have a basis risk swap. However,the portion of the provisional pool that references the SVR is linked (via covenants in thetransaction documentation) to one-month EURIBOR, which is reset on the same day as theone-month EURIBOR on the notes. This mitigates the basis risk. The ECB tracker loans areexposed to basis risk and hence we have applied a basis risk stress on these loans.

SVR loans

Start Mortgages and Mars Capital have proposed to commit to maintain a minimum SVR ofone-month EURIBOR plus 2.5%. We have given credit to this floor in our analysis. In the event ofStart Mortgages' or Mars Capital's insolvency, the right to set the SVR rate will transfer to thereplacement servicer.

Cash Flow Assumptions And Analysis

We stress the transaction's cash flows to test the credit and liquidity support that the assets,subordinated tranches, and cash reserve provide.

We apply these stresses to the cash flows at all relevant rating levels. In our stresses on the classA notes, all notes must pay full principal and timely interest when due. Our preliminary ratings onthe class B-Dfrd to G-Dfrd notes address the payment of ultimate interest and principal.

Our standard cash flow analysis indicates that the available credit enhancement for the classD-Dfrd to F-Dfrd notes is commensurate with higher ratings than those assigned. The preliminaryratings on these notes also reflect sensitivity analysis to the cap, and their ability to withstand thepotential repercussions of the COVID-19 outbreak, including longer foreclosure timing and, inparticular for the class E and F notes, higher defaults.

In our analysis, the class G-Dfrd notes are unable to withstand the stresses we apply at our 'B'rating level when we consider potential higher defaults as a result of COVID 19. Therefore, weapplied our 'CCC' criteria (see "Criteria for Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings"published Oct. 1, 2012), to assess if either a rating in the 'B–' or 'CCC' category would beappropriate. According to our 'CCC' criteria, for structured finance issues, expected collateralperformance and the level of credit enhancement are the primary factors in our assessment of thedegree of financial stress and likelihood of default.

We performed a qualitative assessment of the key variables, along with considering the cash flowresults without increased defaults, and we do not consider repayment of this class of notes to bedependent upon favorable business, financial, and economic conditions. Consequently, we haveassigned a preliminary 'B- (sf)' rating to the notes in line with our criteria.



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Spread compression

The asset yield on the provisional pool can decrease if higher-paying assets default or prepay. Wehave taken this into account in our cash flow analysis. At 'AAA', we have compressed the availableyield by 0.36%. At 'B', we have applied 0.14% as spread compression.

Commingling risk

Start Mortgages' borrowers pay into the collection accounts held with Allied Irish Banks PLC toisolate them from other borrowers, while Mars Capital's borrowers pay into collection accountsheld with Barclays Bank Ireland PLC. The collection accounts are in the name of the legaltitleholders. All amounts in the Start and Mars Capital collection account will be transferred threetimes a month and weekly respectively to the bank account provider (Elavon Financial ServicesDAC, U.K. Branch).

If a legal titleholder were to become insolvent, mortgage collection amounts in the relevantcollection account may become part of the legal titleholder's bankruptcy estate. In order tomitigate this risk, collections are transferred regularly into the issuer's bank account and adeclaration of trust is in place over the collection account. The transaction documents containreplacement language in line with our current counterparty criteria.

Although we believe that the above mechanisms (downgrade language and declaration of trust)mitigate against loss of collections, we have considered that collections could be delayed in theevent of an insolvency. In our analysis, we have therefore applied a liquidity stress ofone-and-a-half months of collections.

Fees

The issuer must pay periodic fees to various parties providing services to the transaction such asservicers, trustees, and cash managers, among others. We have accounted for these in ouranalysis. In particular, and in line with our global residential loans criteria, we have applied astressed servicing fee to account for the potential increase in costs to attract a replacementservicer.

Set-off

As the legal titleholders and the seller are not deposit-taking institutions, we have not applied astress to account for potential deposit set-off risk in our analysis.

Default timing and recoveries

We used the WAFF and WALS derived in our credit analysis as inputs in our cash flow analysis (seetable 6). At each rating level, the WAFF specifies the total balance of the mortgage loans weassume will default over the transaction's life. Defaults are applied on the outstanding balance ofthe assets as of the closing date. We simulate defaults following two paths (i.e., one front-loadedand one back-loaded) over a six-year period. During the recessionary period within each scenario,we assume 25% of the expected WAFF is applied annually for three years.



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Table 6

Default Timings For Front-Loaded And Back-Loaded Default Curves

Year after closing Front-loaded defaults (% of WAFF per year) Back-loaded defaults (% of WAFF per year)

1 25.0 5.0

2 25.0 10.0

3 25.0 10.0

4 10.0 25.0

5 10.0 25.0

6 5.0 25.0

WAFF--Weighted-average foreclosure frequency.

We assume recoveries on defaulted assets to be received 42 months after default forowner-occupied and 24 months for buy-to-let properties. Foreclosure costs are estimated at 3%of the repossession value and €10,000.

Delinquencies

To simulate the effect of delinquencies on liquidity, we model a proportion of scheduledcollections equal to one-third of the WAFF (in addition to assumed foreclosures reflected in theWAFF) to be delayed. We apply this in each of the first 18 months of the recession, and we assumea full recovery of these delinquencies to occur 36 months after they arise.

Prepayments

To assess the impact on excess spread and the absolute level of defaults in a transaction wemodel two prepayment scenarios: high and low (see table 7).

Table 7

Prepayment Assumptions

High Low

Pre-recession 24.0 1.0

During recession 1.0 1.0

Post-recession 24.0 1.0

Interest rates

We modeled two interest rate scenarios in our analysis: up and down. Given that the transactionincorporates an interest rate cap, upward interest rate stress assumptions exceeding the caplevel may be unduly beneficial for the transaction's cash flow projection. Therefore, we have alsoconsidered the rating sensitivity to the strike rate under the interest rate cap as part of ouranalysis.



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Scenarios related to COVID-19 outbreak

We incorporated stresses related to potential repercussions of the coronavirus outbreak, namelyhigher defaults and longer recovery timing. Considering these factors, we believe that theavailable credit enhancement for the rated notes is commensurate with the assigned rating.

Summary

Combined, the default timings, recession timings, interest rates, and prepayment rates describedabove give rise to eight different scenarios at each rating level (see table 8).

Table 8

RMBS Stress Scenarios

Total number of scenarios Prepayment rate Interest rate Default timing

8 High and low Up and down Front-loaded and back-loaded

Scenario analysis

We analyzed the effect of a moderate stress on our WAFF assumptions and its ultimate effect onour preliminary ratings on the notes. We ran two stress scenarios to demonstrate the ratingtransition of a note, and the results are in line with our credit stability criteria.

We also conducted additional sensitivity analysis to assess the impact of, all else being equal,increased WAFF and WALS on our ratings on the notes. For this purpose, we ran eight scenarios byeither increasing stressed defaults and/or reducing expected recoveries as shown in the tablesbelow.

Table 9

Sensitivity Stresses

WALS

WAFF 1.0x 1.1x 1.3x

1.0x Base Case Scenario 3 Scenario 4

1.1x Scenario 1 Scenario 5 Scenario 7

1.3x Scenario 2 Scenario 6 Scenario 8

WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity.

Table 10

Sensitivity Scenarios

Class Base case 1 2 3 4 5 6 7 8

A AAA AA+ AA AA+ AA AA+ AA AA AA-

B-Dfrd AA AA- A+ AA- A+ AA- A A A

C-Dfrd A A- BBB+ A- BBB+ A- BBB BBB+ BBB

D-Dfrd BBB BBB- BBB- BBB- BBB- BBB- BB+ BB+ BB+



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Table 10

Sensitivity Scenarios (cont.)

Class Base case 1 2 3 4 5 6 7 8

E-Dfrd BB BB BB- BB BB BB BB- BB- B

F-Dfrd B B B- or lower B B B B- or lower B- or lower B- or lower

G-Dfrd B- B- or lower B- or lower B- or lower B- or lower B- or lower B- or lower B- or lower B- or lower

Counterparty Risk

The issuer is exposed to Elavon Financial Services DAC, as the transaction's account provider,Allied Irish Banks PLC and Barclays Bank Ireland PLC as collection bank accounts providers of theservicers' collection accounts, and BNP Paribas S.A. as swap counterparty. The documentedreplacement mechanisms adequately mitigate the transaction's exposure to counterparty risk inline with our current counterparty criteria, and therefore, it does not constrain our ratings.

Table 11

Supporting Ratings

Institution/role RatingReplacementtrigger

Collateral postingtrigger

Elavon Financial Services DAC, as thetransaction bank account provider*

AA-/Stable/A-1+ A N/A

Allied Irish Banks PLC, as collection bankaccounts provider

BBB+/Negative/A-2 BBB N/A

Barclays Bank Ireland PLC, as collection bankaccounts provider

A/Negative/A-1 BBB N/A

BNP Paribas S.A., as interest rate cap provider AA-/A-1+ (resolutioncounterparty rating)

A+ Weak

Note: The replacement language in the documentation is in line with our current counterparty criteria.

Sovereign Risk

Our long-term unsolicited credit rating on Ireland is 'AA-'. This enables the notes to achieve amaximum potential rating of up to 'AAA'. Therefore, our structured finance sovereign risk criteriado not constrain our preliminary ratings in this transaction.

Environmental, Social, And Governance (ESG)

Our rating analysis considers a transaction's potential exposure to ESG credit factors. For RMBS,we view the exposure to environmental credit factors as average, social credit factors as aboveaverage, and governance credit factors as below average (see "ESG Industry Report Card:Residential Mortgage-Backed Securities," published March 31, 2021). Social credit factors aregenerally considered above average because housing is viewed as one of the most basic humanneeds and conduct risk presents a direct social exposure for lenders and servicers, particularly asregulators are increasingly focused on ensuring fair treatment of borrowers.



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In our view, this transaction has a relatively higher exposure to governance credit factors given theweak representation and warranties framework and data limitations as outlined in the creditsection above.

By applying certain originator adjustment factors and a valuation haircut to the transaction (seerelevant sections above), we have addressed the ESG credit factors related to the transaction.

Surveillance

We will maintain surveillance on the transaction until the notes mature or are otherwise retired. Todo this, we will analyze regular servicer reports detailing the performance of the underlyingcollateral, monitor supporting ratings, and make regular contact with the servicer to ensure that itmaintains minimum servicing standards and that any material changes in the servicer'soperations are communicated and assessed.

Appendix

Transaction participants

The full list of transaction parties (excluding those providing supporting ratings) are listed below.

Transaction Participants

Originators Permanent TSB PLC, Irish Nationwide Building Society, and Springboard.

Arranger Morgan Stanley & Co. International PLC.

Lead manager Morgan Stanley & Co. International PLC.

Seller Daire Residential DAC.

Primary servicers Start Mortgages DAC and Mars Capital Finance Ireland DAC.

Issuer administration consultant Hudson Advisors Ireland DAC.

Cash manager Elavon Financial Services DAC.

Corporate services provider Intertrust Finance Management (Ireland) Ltd.

Principal paying agent Elavon Financial Services DAC.

Registrar U.S. Bank Global Corporate Trust Ltd.

Interest rate cap provider BNP Paribas.

Trustee U.S. Bank Trustee Ltd.

Bank account provider Elavon Financial Services DAC.

Collection bank account providers Allied Irish Bank and Barclays Bank Ireland PLC

Related Criteria

- Criteria | Structured Finance | General: Global Framework For Payment Structure And CashFlow Analysis Of Structured Finance Securities, Dec. 22, 2020

- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates InStructured Finance, Oct. 18, 2019



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- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology AndAssumptions, March 8, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating StructuredFinance Securities: Methodology And Assumptions, Jan. 30, 2019

- Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools OfResidential 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 InStructured Finance Transactions, Oct. 9, 2014

- 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 TransactionAccounts, 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

- Sovereign Risk Indicators, April 12, 2021

- ESG Industry Report Card: Residential Mortgage-Backed Securities, March 31, 2021

- Europe's Housing Market Will Chill In 2021 As Pent-Up Pandemic Demand Eases, Feb. 22, 2021

- Pandemic Won't Derail European Housing Price Rises, Oct. 20, 2020

- Government Job Support Will Stem European Housing Market Price Falls, May 15, 2020

- Residential Mortgage Market Outlooks Updated For 13 European Jurisdictions FollowingRevised Economic Forecasts, May 1, 2020

- Economic Research: Europe Braces For A Deeper Recession In 2020, April 20, 2020

- Reports Discuss How COVID-19 Could Affect European Structured Finance, March 30, 2020

- European ABS And RMBS: Assessing The Credit Effects Of COVID-19, March 30, 2020

- Will Mortgage Payment Suspensions Related To COVID-19 Affect European RMBS?, March 13,2020

- Rise In Repayments Expected For U.K. Legacy Borrowers, Nov. 13, 2019

- More Than One-Third Of U.K. Legacy Borrowers Are "Mortgage Prisoners", Sept. 4, 2019

- 2017 EMEA RMBS Scenario And Sensitivity Analysis, July 6, 2017

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top FiveMacroeconomic Factors, Dec. 16, 2016

- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The TopFive Macroeconomic Factors, Dec. 16, 2016



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