New Issue: Together Asset Backed Securitisation 2020-1 PLC

Primary Credit Analyst: Rory O'Faherty, London + 44 20 7176 3724; [email protected]

Secondary Contact: Aarondeep Hothi, London + 44 20 7176 0111; [email protected]

Table Of Contents

Overview

The Credit Story

Originator

Collateral

Credit Analysis And Assumptions

Macroeconomic And Sector Outlook

Transaction Summary

Cash Flow Modeling And Analysis

Counterparty Risk

Sovereign Risk

Surveillance

Appendix

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Related Criteria

Related Research

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© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global 2483578 Ratings' permission. See Terms of Use/Disclaimer on the last page. New Issue: Together Asset Backed Securitisation 2020-1 PLC

Ratings Detail

Ratings

Class size Credit Step-up Legal final Class Rating* (mil. £) enhancement (%) Interest Step-up margin date maturity A AAA (sf) 290,970,000 22.31 Compounded daily Compounded daily June 2024 December SONIA + 1.45% SONIA + 2.90% 2061 B-Dfrd AA+ (sf) 23,790,000 15.81 Compounded daily Compounded daily June 2024 December SONIA + 2.25% SONIA + 3.25% 2061 C-Dfrd AA (sf) 14,640,000 11.81 Compounded daily Compounded daily June 2024 December SONIA + 2.75% SONIA + 3.75% 2061 D-Dfrd A+ (sf) 9,150,000 9.31 Compounded daily Compounded daily June 2024 December SONIA + 3.75% SONIA + 4.75% 2061 E-Dfrd A (sf) 9,150,000 6.81 Compounded daily Compounded daily June 2024 December SONIA + 5.00% SONIA + 6.00% 2061 X-Dfrd BB (sf) 12,810,000 0.0 Compounded daily Compounded daily June 2024 December SONIA + 5.25% SONIA + 5.25% 2061 R NR 10,988,000 N/A N/A N/A N/A December 2061 Z NR 18,300,000 N/A N/A N/A N/A December 2061 Residual NR N/A N/A N/A N/A N/A N/A certificates

*Our ratings address timely receipt of interest and ultimate repayment of principal on the class A notes, and the ultimate payment of interest and principal on the other rated notes. SONIA--Sterling Overnight Index Average. NR--Not rated. N/A--Not applicable.

Overview

• S&P Global Ratings has assigned credit ratings to Together Asset Backed Securitisation 2020-1 PLC's class A notes and to the interest deferrable class B-Dfrd to X-Dfrd notes.

• The transaction is a static RMBS transaction, which securitizes a portfolio of £366.03 million first- and second-lien mortgage loans, both owner-occupied and buy-to-let (BTL), secured on properties in the U.K. Further advances, product switches, and loan substitution are permitted under the transaction documents.

• The loans in the pool were originated by Together Personal Finance Ltd. and Together Commercial Finance Ltd. between 2017 and 2020.

• We consider the collateral to be nonconforming based on the prevalence of loans to borrowers with adverse credit history, such as prior county court judgments (CCJs).

• Of the securitized pool, 27.02% (by current balance) of the mortgage loans have had a payment holiday due to COVID-19, and 19.20% (by current balance) have an active payment holiday in place due to COVID-19.

• Credit enhancement for the rated notes consists of subordination, a nonamortizing reserve fund, and

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overcollateralization following the step-up date, which will result from the release of the excess spread amounts from the revenue priority of payments to the principal priority of payments.

• Liquidity support for the class A notes is in the form of an amortizing liquidity reserve fund. The nonamortizing reserve fund can provide liquidity support to the class A to E notes. Principal can also be used to pay interest on the most-senior class outstanding (for the class A to E notes only).

• There are no rating constraints in the transaction under our counterparty, operational risk, or structured finance sovereign risk criteria. We consider the issuer to be bankruptcy remote.

The Credit Story

Strengths Concerns and mitigating factors The weighted-average original loan-to-value (LTV) ratio is 59.7%. This As a result of the COVID-19 pandemic, as of July 13, 2020, 19.20% of the is lower than the average for a typical U.K. RMBS transaction. portfolio's loans have active payment holidays of their monthly mortgage payments, which will decrease the excess spread available to support the transaction over time. Our cash flow analysis and ratings incorporate liquidity stresses to capture the risk of payment holidays (see "Payment Holiday" below). The assigned ratings remain robust under these stresses. Together is a specialist lender with a significant track record in both Our credit and cash flow analysis and related assumptions consider the first- and second-charge owner-occupied and buy-to-let (BTL) transaction's ability to withstand the potential repercussions of the origination and servicing, including effective use of receiver of rent COVID-19 outbreak, namely, higher defaults, longer recovery timing, and and repossession. All servicing staff are able to work remotely to additional liquidity stresses. Considering these factors, we believe that ensure servicing continuity. the available credit enhancement is commensurate with the ratings assigned. As the situation evolves, we will update our assumptions and estimates accordingly. Securitization is an integral part of the lender's funding strategy. Under the transaction documents, before the first optional redemption Together has completed four private securitizations to date, and it has date, further advances, product switches, and loan substitution are issued three publicly placed securitizations. However, this is the first permitted. Each of these can result in the pool's credit quality one to be rated by S&P Global Ratings. deteriorating over time. Therefore, the transaction documents outline asset conditions that limit the extent to which further advances, product switches, or substitutions are allowed. We have factored this additional flexibility into our credit analysis by applying an adjustment to our foreclosure frequencies and loss severity calculations at every rating level. Most of the valuations are full internal and external inspections on While the information provided by the originator meets our standards for properties. The use of drive-by or automated valuation model (AVM) quantity, timeliness, and reliability, there were a number of additional valuations is limited to standard construction types and subject to data points that we sought but were not able to obtain. These data points maximum LTV and loan size conditions. were captured during the origination process but were not subsequently systemized. In absence of this information, we formed assumptions based on other associated information that we were provided. Servicing is in-house, and Together has well-established and fully The transaction features a number of shared ownership loans (4.6%). integrated servicing systems and policies. "Staircasing," or when the borrower purchases a further share of the property enabling them to own a greater proportion of the property, would be funded through further advances, which can be sold to the transaction as part of the flexibility outlined above. This risk is partially mitigated by the fact that there is a cap on further advances sold into the pool (5% of the portfolio by principal balance), and further advances will not be granted to borrowers in arrears. In addition to this, affordability would be re-tested at the point of request for a further advance to staircase.

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The Credit Story (cont.)

Strengths Concerns and mitigating factors The historical performance of the lender's mortgage book has proven The transaction contains a number of loans advanced to limited liability stable over the past five years, with 90-day arrears or more below companies rather than directly to individuals. All of these loans benefit 2.3% across the loan book over that time. As of May 2020, 90-day from personal guarantees. arrears or more across the regulated first charge book and regulated second charge book stood at 1.5% and 3.5% respectively and have historically been at or below these respective levels. Across the unregulated first charge book, 90-day arrears or more stood at 1.9% and peaked at 3.2% in January 2013. Across the unregulated second charge book, 90-day arrears or more stood at 2.5% and peaked at 5.7% in June 2013. The securitized pool does not contain any loans secured over Around 12.9% of the pool has adverse credit history in the form of CCJs. incomplete properties or houses in multiple occupations (HMOs). In The majority of these borrowers have one prior CCJ, and the value of the addition to this, there are no bridging loans in the pool. CCJ is less than £5,000. We captured this risk by applying an adjustment to foreclosure frequency based on the number and the value of the CCJs. The capital structure is fully sequential regarding the application of Around 19.2% of the pool comprises interest-only loans secured over principal proceeds. Credit enhancement can therefore build up over owner-occupied properties. Since there is no mandatory capital time for the rated notes, enabling the capital structure to withstand repayment over the term of the loan, there is a risk that the outstanding performance shocks. principal balance will not be paid by the end of the loan term. We have captured this risk by applying an adjustment to foreclosure frequency on the interest-only loans secured over owner-occupied properties. Under our base-case scenario, there is a high level of excess spread The loans within the securitized pool have low seasoning (most were providing credit enhancement in this transaction, as the originated in 2019). Hence, arrears (currently 1.1% and all in the 30-60 weighted-average post-reversion margin on the loans is close to delinquency bracket) are yet to fully materialize within the pool. We 5.75%. This includes our assumptions regarding the standard variable capture this risk by applying an originator adjustment to foreclosure rate (SVR) loans (see "Variable Rate Loans"). frequency. There is a fully funded non-amortizing general reserve fund sized at 80.7% of the securitized portfolio is classified as remortgage loans in 3.16% of the closing balance of the class A through E-Dfrd notes less order to withdraw equity. We consider loans for this purpose, rather than the class A liquidity reserve fund required amount. The general to purchase a property, to be higher risk. Our analysis reflects this risk. reserve fund is split into two: a Standard Reserve Fund and a COVID-19 Reserve Fund. The general reserve fund provides credit enhancement and can be used to pay senior fee and expense shortfalls, interest shortfalls on the class A to E-Dfrd notes, and to cure any debit balance on the principal deficiency ledger (PDL). The transaction features a liquidity reserve fund that can be used to There is some borrower concentration within the pool. One borrower has pay senior fee and expense shortfalls and class A interest shortfalls. 69 loans within the securitized pool that are secured on 69 properties. This borrower accounts for around 2.32% of the securitized pool balance. We have captured this additional risk in our cash flow analysis. The transaction has additional liquidity support from the ability to use The BTL loans within the pool have a weighted-average interest rate of principal receipts to pay for interest shortfalls on the most-senior class around 6.8%. This is higher than our estimation of a stressed loan of notes outstanding (class A to E-Dfrd). financing cost. Hence, we have stressed the higher rate in our credit analysis when determining the appropriate BTL adjustment to foreclosure frequencies for those loans. If the notes are not redeemed on the optional redemption date, all the There are holiday lets within the collateral pool (1% of the pool). Holiday revenue proceeds after topping up the general reserve fund and paying lets are considered riskier than traditional BTLs due to the short-term the Class X-Dfrd interest will be diverted to pay principal on the notes, nature of the let. therefore providing more protection to the senior notes. The debt-service coverage ratio (DSCR) in the pool is quite high. The borrowers in the pool are typically those who are not considered by There are very few loans with a loan-to-value (LTV) ratio above 80% the "high street" banks. Typically, this may be because they have and DSCR below 1.0x. Therefore, there is limited risk layering in the less-than-perfect credit, they are self-employed or have complex income pool, i.e., loans with high LTVs and low DSCRs. streams that require more prudent analysis during underwriting, they may be first-time landlords, or the property may be made of nonstandard materials. We have considered this in our assessment of the lending policy and underwriting standards and captured this within the originator adjustment.

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The Credit Story (cont.)

Strengths Concerns and mitigating factors The transaction is subject to the risk of a mismatch between the rate Around 18% of the BTL loans within the pool have top slicing, i.e., of interest payable on the mortgage loans and the rate of interest addition of borrowers' income to rental income, to meet stressed payable on the notes. 40.8% of the pool will pay based on a fixed rate affordability requirements. Top slicing can be a concern if not done on of interest for an initial period while the liabilities will pay based on the property-portfolio level because borrowers may be using a single income Sterling Overnight Interbank Offered Rate (SONIA). To hedge this risk, stream to meet stressed affordability conditions on several loans. the issuer will enter into an interest rate swap. However, when affordability with top slicing is assessed by Together, this risk is mitigated as Together will be able to identify if the additional income is being used to supplement rental income under a different loan as part of the underwriting process. Effectively, this additional income is assessed on a net basis. For all loans within the pool, borrower income has been assessed on a Around 19.8% of the properties in the pool do not have full valuations. full verification basis. There are no self-certified loans within the pool. This risk is captured in our loss severity calculations, and we apply a 5% valuation haircut to property values if the loan does not have a full valuation. Together factors in the risk of utilizing drive-by valuations during the underwriting process. Drive-by valuations are generally reserved for standard construction types and are subject to maximum LTV and maximum loan size conditions before they are used. A high proportion of fixed-rate loans have a fixed-rate period ending in 2021. Therefore, the prepayment rates might increase significantly causing a reduction in excess spread. We have considered this in our cash flow analysis. If the notes are not redeemed on the optional redemption date, the margin on each rated note will step up to a higher rate. This will reduce the excess spread in the deal. The transaction has exposure to non-U.K. residents (2.1%). We have not made any adjustments based on this because these are BTL loans and therefore the rental income should be stable regardless of the landlord's location. 28.4% of the securitized pool comprises second-lien mortgages. Second-lien mortgages are exposed to higher losses compared with first-lien mortgages because if repossession occurs, the first-lien loan balance is settled in its entirety before the second-lien loan balance is settled. We have captured this risk in our credit analysis by applying an adjustment to the foreclosure frequencies on these loans. In addition, we consider the prior-ranking balance when calculating loss severity. This risk is partially offset by the fact that there may be amortization on the first-lien loan, which will reduce the credit risk of the second-lien loan. After the fixed-rate loans have reverted to a floating rate linked to the Bank of England base rate, there will be an unhedged index mismatch between the assets and the liabilities. We have stressed this unhedged basis risk in our cash flow analysis.

Originator

Together, formerly Jerrold Holdings Ltd., is a Cheadle-based specialist U.K. mortgage provider lending to customers and mortgage intermediaries through Together Personal Finance Ltd. and Together Commercial Finance Ltd. Together was established in 1974 and became Financial Conduct Authority-regulated in 2004. As of March 2020, the company had a book of £4.3 billion first- and second-charge owner-occupied and BTL loans secured over residential, commercial, and semi-commercial properties across the U.K. Together also has a strong presence in the bridging loan market and the development finance market.

Together has around 750 employees and has remained profitable throughout multiple business cycles. The weighted-average original loan-to-value (OLTV) ratio across the entire loan book stood at 57.8% as of March 2020,

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Together's lending policy is designed to attract customers who would typically be turned away from "high street" banks due to adverse credit histories or complex income streams, which require greater investigation and analysis. A prominent feature of the company's lending policy is conservative LTVs at origination. Only around 2.3% of the loan book has a CLTV greater than 80%. The company's exposure to negative equity from 5%, 10%, and 20% drops in property values is estimated to be £3.7 million, £8.7 million, and £28.8 million, respectively.

Origination process The overall lending policy is owned by the company's credit committee, which meets frequently and is responsible for considering changes to it.

For first-charge residential purchases and remortgages, the lending policy specifies that:

• The maximum LTV for purchases is 75%, and the maximum LTV for remortgages is 70%.

• A maximum of six CCJs/defaults in the past 12 months is permitted, though the maximum LTV for such borrowers is 50%.

• Lending on ex-council flats and maisonettes (above four floors), non-standard construction, defective, and high-rise (over six floors) is subject to a maximum LTV of 60%.

For first-charge loans on shared-ownership properties, the lending policy specifies that:

• The maximum LTV is 75% (including the share that the customer doesn't own). Together can lend up to 100% of the client's share.

• A maximum of two CCJs/defaults in the past 12 months is permitted, though the maximum LTV for such borrowers is 70%.

• Lending on ex-council flats and maisonettes, non-standard construction, defective, and high-rise is subject to a maximum LTV of 70%.

For first-charge right-to-buy purchases, the lending policy specifies that:

• The maximum LTV is 65%, and Together can fund 100% of the client's share.

• A maximum of six CCJs/defaults in the past 12 months is permitted, though the maximum LTV for such borrowers is 50%.

• Lending on ex-council flats and maisonettes, non-standard construction, defective, and high-rise is subject to a maximum LTV of 55%.

For regulated BTL (consumer BTL, the lending policy specifies that:

• The maximum LTV for first-charge remortgages is 70%, and the maximum LTV for second-charge loans is 70%.

• A maximum of six CCJs/defaults in the past 12 months is permitted, though the maximum LTV for such borrowers is 55%.

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For an unregulated BTL, the lending policy specifies that:

• The maximum LTV for first-charge purchases is 75%, for first-charge remortgages is 70%, and for second-charge mortgages is 75%.

• A maximum of six CCJs/defaults in the past 12 months is permitted, though the maximum LTV for such borrowers is 60% for first-charge purchase and 55% for first-charge remortgages and for second-charge mortgages.

For regulated second-charge loans, the lending policy specifies that:

• The maximum LTV is 77.5% for standard construction houses and bungalows, including ex-council properties.

• Lending on ex-council flats and maisonettes, non-standard construction, defective, and high-rise is subject to a maximum LTV of 60%.

• A maximum of six CCJs/defaults in the past 12 months (and two in the last six months) is permitted, though the maximum LTV for such borrowers is between 50% and 55% depending on the property type.

When assessing BTLs, rental income must be a minimum of 125% of repayments for a basic tax payer, 145% for a higher tax rate payer, and 165% for an additional tax rate payer. If rental coverage is less than the prescribed amounts, then personal income is accepted. Rental income greater than 50% of other provable disposable income must exceed secured lending payments. When assessing 50% of provable disposable income, Together carries out a full affordability assessment on the borrower's personal income, in line with how it underwrites owner-occupied mortgages, including using Office for National Statistics' statistics for expenditure. For landlords with a portfolio, Together underwrites the full portfolio to understand the assets the borrowers has, income they generate, and how they are financially serviced. This ensures that, when Together carries out a full affordability assessment of a borrower's income, it captures and considers any income used to service other mortgage loans to calculate 50% of provable disposable income. Hence, this mitigates the risk that the borrower uses the same additional income stream to meet affordability for several BTLs.

There is some use of drive-by valuations. However, this is not permitted on ex-council flats and maisonettes, nonstandard construction, and high-rises. The valuation panel is managed by an in-house surveyor, and all valuers must have suitable professional indemnity insurance in place, local knowledge, and residential experience.

Servicing The regulated loans will be serviced by Together Personal Finance Ltd., and the non-regulated loans by Together Commercial Finance Ltd. We consider both entities' servicing procedures and practices to be in line with market standards for U.K. RMBS. We are satisfied that the servicer has implemented appropriate measures to respond to the impact of COVID-19 on borrowers.

Together has been servicing BTL, owner-occupied, first-lien, and second-lien loans for a number of years and through several business cycles with successful outcomes. For this transaction, there is a standby servicer in place on day one (Link Mortgage Services Ltd.), which we view as positive.

All of Together's servicing activities are centralized in Cheadle, and there is a high degree of automation during the transfer from origination to servicing. As is common with U.K. mortgage lenders, Together devotes a considerable amount of resources to early-stage arrears management strategies.

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Collateral

Table 1 Collateral Key Features*

Together Asset Backed Securitisation Precise Mortgage 2020-1 PLC Castell 2019-1 PLC Funding 2020-1B PLC Pool cut-off date July 2020 September 2019 October 2019 Originator Together Commercial Finance Ltd. (nonbank) Optimum Credit Ltd. Charter Court Financial and Together Personal Finance Ltd. (nonbank) (nonbank) Services (bank) Jurisdiction U.K. U.K. U.K. Principal outstanding of the securitized 366.03 228.1 400.7 pool (mil. £) Number of properties 4,090 5,068 2,424 Average loan balance (£) 89,494 45,003 165,330 Weighted-average indexed current LTV 60.2 68.0 72.6 ratio (%)(including first lien) Weighted-average original LTV ratio 59.7 65.8 71.5 (%)(including first lien) Weighted-average effective LTV ratio (%) 59.8 66.2 71.7 Weighted-average seasoning (months) 13 6 10 Second-lien (%) 28.4 100 0 Interest only (%) 51.8 1.6 90 Buy-to-let (%) 46.6 0 100 CCJ's >= one (%) 12.9 3.0 0.0 Loan purpose – purchase (%) 16.7 17.7 44 Jumbo valuations (%) 15.9 9.9 3.3 'AAA' RMVD (%) 65.6 63.6 65.3 Arrears = one month (%) 1.1 0.50 0.0 'AAA' WAFF (%) 23.90 29.86 23.01 'AAA' WALS (%) 57.05 92.00 54.83

*Calculations are according to S&P Global Ratings' methodology. LTV--Loan-to-value. RMVD--Repossession market value declines.

We received loan-level data as of July 13, 2020, and historical performance data on the originator's book since 2004. The quality of data provided is in line with S&P Global Ratings' standards.

We received a pool audit report, and we have applied an adjustment to our weighted-average foreclosure frequency because we observed a slightly higher error count than we would typically expect to see.

The U.K. second-charge residential mortgage market has changed significantly since the global financial crisis. Improved regulation--and specifically, bringing the affordability assessments for borrowers in line with first-lien mortgage lending--has improved the affordability of second-lien lending. Also because of regulations, LTV ratios and risk layering tend to be significantly lower today. For example, pre-financial crisis second-lien originations were categorized by high instances of adverse credit, such as CCJs and bankruptcies, and other markers of elevated risk, such as self-certification of income.

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Of the securitized portfolio, 71.6% comprises first-lien loans and 28.4% comprises second-lien loans. Of the loans, 46.6% is BTL and 51.8% is interest-only. Around 19.2% of the pool is interest-only loans secured over owner-occupied properties. These loans are interest-only for the loan's term. Since there is no mandatory capital repayment over the loan's term, there is a risk that the outstanding principal balance will not be paid by the end of the term. Given that interest-only is a standard product in the U.K. BTL market, we do not consider this to pose additional credit risk for those loans.

Of the loans, 12.9% were granted to borrowers with prior CCJs. The majority of these borrowers have one prior CCJ, and the value of the CCJ is less than £5,000. The transaction also features a number of shared ownership loans (4.59%). "Staircasing," when the borrower purchases a further share of the property enabling them to own a greater proportion of the property, is permitted in this transaction. Further advances to fund this can be sold into the pool before the step-up date under the flexibility permitted within the transaction documents. In addition, 8.46% of loans were granted to first-time buyers, and 3.68% of the pool comprises right-to-buy mortgages on ex-council properties. There are also holiday lets within the collateral pool (1% of the pool). Holiday lets are considered riskier than traditional BTLs due to the short-term nature of the let.

Of the loans, 80.7% were originated for refinancing with equity extraction based on the information provided. A further 2.6% were for refinancing without any additional equity extraction.

The assets are primarily concentrated in Greater London (29.8%) and South East (21.3%). Given that the concentration in Greater London exceeds the threshold defined in our criteria, we applied adjustments in our weighted-average foreclosure frequency (WAFF) calculations.

The pool is newly originated with low seasoning; however, the historical performance data of the originator's book has been stable over the past five years.

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Chart 1

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Chart 2

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Chart 3 Chart 4

Chart 5 Chart 6

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Chart 7

Payment holiday As of July 13, 2020, 19.20% of the securitized pool was under payment moratoria due to COVID-19. Cumulatively, 27.02% of the pool has had a payment holiday granted due to COVID-19 at some point. Across the Together book, payment moratoria usage stands at around 17%. This is because the wider book includes development finance, bridging loans, and other commercial offerings.

The monthly payments for these borrowers are deferred to a later date, while interest continues to accrue. Borrowers that are under payment holidays won't be classified as in arrears if they were previously up to date on payments.

Around 43.50% of borrowers in the securitized pool with a payment moratorium in place extended their initial one. This is partly explained by the fact that many of these borrowers initially utilized a moratorium of fewer than three months (average of 2.59 months).

Within the securitized pool, 38.5% of borrowers are making some level of payment while on a payment moratorium. Borrowers on a payment moratorium who continue to make monthly payments are paying around 50% of their contractual monthly payment on average.

The exit strategy for customers under payment holiday will be a material factor for the pool's credit performance. Together has started contacting borrowers that are currently under these moratoria to understand their current financial income, employment status, and the industry they are working in, to assess whether alternatives to a payment

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In order to test the structure's robustness to liquidity shocks resulting from payment holidays, we have incorporated an increase in the number of borrowers requesting a payment holiday after the transaction's issue date. In our cash flow analysis, we tested the sensitivity of a scenario in which up to 25% of the portfolio were able to extend or request a payment moratorium for the following six months after the closing date, paying back these amounts in 48 months. The ratings assigned are able to withstand these stresses.

In addition, some of the borrowers that are currently under payment holidays could move into arrears and/or default on their mortgage loan. We have incorporated this risk in our foreclosure frequency assumptions (see "Macroeconomic And Sector Outlook").

Chart 8

Asset performance The securitized pool contains 1.1% of loans that are in arrears of exactly one month. We have received the historical performance data on the originator's BTL book since 2004. The originations' performance has been stable over the past five years.

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Chart 9

Credit Analysis And Assumptions

We applied our global residential loans criteria to the pool in order to derive the WAFF and the weighted-average loss severity (WALS) at each rating level (see table 2).

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

Table 2 Portfolio WAFF And WALS

Rating level WAFF (%) WALS (%) Credit coverage (%) AAA 23.90 57.05 13.63 AA 16.19 51.29 8.30 A 12.19 40.60 4.95 BBB 8.40 32.96 2.77 BB 4.40 26.49 1.17 B 3.50 19.84 0.69

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

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Chart 9

Macroeconomic And Sector Outlook

S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. We are using this assumption in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

We currently expect GDP in the U.K. to shrink by 8.1% this year before rebounding by 6.5% in 2021 (see "Economic Research: The U.K. Faces A Steep Climb To Recovery," published on July 1, 2020, and "Credit Conditions Europe: Curve Flattens, Recovery Unlocks," published on June 30, 2020). Our current expectations are described in table 3.

Table 3 U.K. Housing Market Statistics

2019 2020f 2021f 2022f 2023f Real GDP growth (%) 1.4 (8.1) 6.5 2.6 2.1 Unemployment rate (%) 3.8 6.0 6.2 4.9 4.7 U.K. housing market forecast (%)* 1.6 (3.0) 0.0 3.5 3.8

*Nominal prices, percentage change, year-on-year. F--forecast. Source: S&P Global Ratings.

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Based on our macroeconomic forecasts we revised the 'B' foreclosure frequency assumptions in our global residential loans criteria for the U.K. archetypal pool to 1.75% from 1.50% on May 1, 2020 (see "Residential Mortgage Market Outlooks Updated For 13 European Jurisdictions Following Revised Economic Forecasts," published on May 1, 2020).

In addition, we have considered the potential increased credit impact on this pool due to COVID-19, given the relatively high proportion of payment holidays granted, the nature of the assets, and the potential vulnerability to higher delinquencies and defaults through an increased originator adjustment. We have also considered the transaction's ability to withstand additional liquidity stresses and extended foreclosure timing assumptions. The assigned ratings remain robust under these stresses.

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

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Transaction Summary

Chart 10

The issuer is an English special-purpose entity (SPE), which we consider to be bankruptcy remote. We analyzed its corporate structure in line with our legal criteria.

Interest will be paid monthly on the interest payment dates, beginning in September 2020. The rated notes pay interest equal to compounded daily SONIA plus a class-specific margin, with a further step up in margin following the optional call date in June 2024. All of the notes will reach legal final maturity in December 2061.

Deferral of interest Under the transaction documents, interest payments on the class B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, and X-Dfrd notes can

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© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the 2483578 last page. New Issue: Together Asset Backed Securitisation 2020-1 PLC be deferred until they become the most senior. Consequently, any deferral of interest on these classes would not constitute an event of default until they become the most senior. Unpaid interest will accrue at the note-specific coupons and be due at the notes' legal final maturity. When a deferrable note becomes the most-senior note outstanding, previously deferred interest is due immediately on that interest payment date.

Our ratings address the timely payment of interest and the ultimate payment of principal on the class A notes and the ultimate payment of interest and principal on the other rated notes. Our analysis reflects our view that, at the assigned rating, the senior fees and swaps outflows, if any, will be paid on a timely basis.

Liquidity reserve fund The transaction features a liquidity reserve fund (LRF) that will be available to cover shortfalls on the senior fees and expenses, the swap outflows, and the interest payment on the class A notes.

The LRF was fully funded at closing, and the required amount is 1.5% of the outstanding balance of the class A notes (subject to a floor of 1% of the initial balance of the class A notes).

As the LRF amortizes, any amounts released will first be used to ensure the general reserve fund is at target and then subsequently be used as part of available revenue.

Should a LRF amortization trigger event occur (see below), then the LRF will no longer continue to amortize.

• The class A notes are not redeemed in full on the first optional redemption date (June 2024).

• The cumulative default rate on the portfolio is greater than 5% of the aggregate balance on the closing date.

General reserve fund The transaction also features a general reserve fund that is available to cover shortfalls on the senior fees and expenses, the swap outflows, the interest payments on the class A to E-Dfrd notes, and to cure any debt balance on the PDL of each respective notes. There are no conditions for using the general reserve fund for the class A to E-Dfrd notes.

The general reserve fund was fully funded at closing and has a required amount of 3.16% of the closing balance of the class A to E-Dfrd notes minus the LRF required amount.

The general reserve fund is split into two: a "Standard Reserve Fund" sized at 2.5% of the closing balance of the class A to E-Dfrd notes less the liquidity reserve fund required amount, and a "COVID-19 Reserve Fund" sized at 0.66% of the class A to E-Dfrd notes. The two function in the same way, and in a scenario where there are no loans with payment holidays remaining, the COVID-19 reserve fund will remain available to provide support.

Principal to pay interest In high-delinquency scenarios, there may be liquidity stresses where the issuer would not have sufficient revenue receipts to pay senior fees or interest on the outstanding classes of notes. To mitigate this risk, the issuer can use any existing principal receipts to pay shortfalls in senior fees and interest on the class A to E-Dfrd notes if the notes are the most-senior class outstanding. The use of principal to pay interest would result in the registering of a debit in the PDL and may reduce the credit enhancement available to the notes. Principal will be used only if the liquidity reserve and

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Principal deficiency ledgers The PDL comprises six subledgers, one for each of the mortgage-backed class of notes.

Amounts will be recorded on the PDL if the portfolio suffers any losses or if the transaction uses principal as available revenue receipts.

Payment priority Table 4 Priority of Payments

Revenue priority of payments Principal priority of payments Senior fees (including servicing fees) To pay shortfalls on senior fees, the swap outflows, the issuer profit, interest on the class A notes, and the class B-E notes' interest (see principal to pay interest) Swap payments Class A notes' principal Issuer profit Class B-Dfrd notes' principal Class A notes' interest Class C-Dfrd notes' principal Top-up liquidity reserve to target Class D-Dfrd notes' principal Class A notes' PDL Class E-Dfrd notes' principal Class B notes' interest Class X-Dfrd notes' principal Class B notes' PDL On or after the optional redemption date, class R notes' interest Class C-Dfrd notes' interest Class R notes' principal Class C-Dfrd notes' PDL On or after the optional redemption date, class Z notes' interest Class D-Dfrd notes' interest Class Z notes' principal Class D-Dfrd notes' PDL All remaining amounts to be applied as available revenue receipts Class E-Dfrd notes' interest Class E-Dfrd notes' PDL Top up GRF to target Class Z notes' PDL Class X-Dfrd notes' interest Prior to the optional redemption date, class X-Dfrd notes' principal On the final redemption date or on or after the optional redemption date, an amount equal to the lesser of (i) all remaining amounts (if any) and (ii) the amount required by the issuer to redeem the notes in full less any other available principal receipts otherwise available to the issuer, to be applied as available principal receipts Prior to the optional redemption date, class R notes' interest Swap subordinated amounts Prior to the optional redemption date, class R notes' principal Prior to the optional redemption date, class Z notes' interest Excess to residual certificates

PDL--Principal deficiency ledger.

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Interest rate risk Approximately 40.8% of the pool pays interest based on a fixed rate, but all will revert to a floating interest rate, linked to the Bank of England base rate. The remaining assets pay a floating interest rate.

To address the interest mismatch between the mortgage loans and the rated notes, the transaction will feature a fixed-to-floating interest rate swap, where the issuer will pay a fixed rate and receive SONIA to mirror the index paid on the notes. The balance of the swap will be a fixed amortization schedule mirroring the fixed-rate loans' amortization profile while they remain fixed, assuming 0.0% prepayments on the fixed-rate loans. As a result, if any prepayments or defaults occur, the deal will be over-hedged. If SONIA is below the fixed rate paid by the special-purpose vehicle, being over-hedged is negative for the transaction, because the notional would be higher than the actual size of the collateral. The collateral posting and replacement triggers in the swap documents are in line with our counterparty criteria.

Post-reversion interest rates on the mortgage loans are based on the Bank of England base rate. To account for this risk, we applied basis risk stresses in our cash flow analysis to the fixed-rate loans once they revert to paying a floating rate of interest.

Cash Flow Modeling And Analysis

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

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

Class X-Dfrd notes Our global RMBS criteria establish rating-specific minimum credit enhancement levels applicable for assigning ratings at issuance of a new transaction. For the class X-Dfrd notes, the level of hard credit enhancement is below the minimum required credit enhancement. However, in our analysis, we have concluded that the level of soft enhancement in the transaction (excess spread) is sufficient to support the assigned ratings.

Commingling Borrowers pay into a collection account held with National Westminster Bank PLC in the name of the sellers.

If the legal titleholder were to become insolvent, the mortgage collection amounts in the collection account may become part of the legal titleholder's bankruptcy estate. In order to mitigate this risk, each servicer will transfer all amounts received in the collection account arising in respect of payments from the borrowers to the deposit account on or prior to the second business day immediately following receipt of such amounts into the collection account. A declaration of trust in favor of the issuer is then in place over the collection account. The transaction documents contain replacement language in line with our counterparty criteria.

Although we believe that the above mechanisms (downgrade language and declaration of trust) mitigate against loss of collections, the collections could be delayed in the event of an insolvency. In our analysis, we therefore applied a

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Variable rate loans Around 59.2% of the loans within the pool are floating for life. They pay a variable rate of interest that can change with Together's cost of raising funds. There is no contractual link to a standard variable rate (SVR) or any index, and so the entire rate is discretionary. For the purposes of our analysis we have assumed that Together's cost of raising funds is linked to the Bank of England base rate. We have then applied haircuts of 55% at 'AAA' to 25% at 'B', in line with our global RMBS criteria, to the excess of the variable rate on these loans over the Bank of England base rate at origination.

Basis risk After the fixed-rate loans have reverted to a floating rate linked to the Bank of England base rate, there will be an unhedged index mismatch between the assets and the liabilities. This unhedged basis risk has been stressed in our cash flow analysis for the first-lien loans when they become floating. There isn't any unhedged basis risk exposure during the fixed-rate period as there is a fixed-to-floating interest rate swap in place to cover this (see "Interest rate risk" section above).

Second-lien fixed-floating loans Fixed-rate mortgages are a relatively new product offering for Together and hence historical prepayment data does not capture prepayments toward the end of the fixed-rate period. To capture this risk in our analysis, we have applied a haircut on the margins on the second-lien fixed-floating loans within the pool. We believe that these loans are the most likely to prepay, and by applying a haircut to the margin on these loans, we are capturing the spread compression that is likely to occur should these loans prepay. Our ratings reflect this stress.

Spread compression The asset yield on the pool can decrease if higher-paying assets default or prepay. However, as previously mentioned, we have applied haircuts to the margin on the variable-rate loans. We further applied a stress on margins of the second-lien to fixed-to-floating loans, and we applied basis risk stress on the remaining fixed-to-floating loans. We did not apply any additional spread compression because we believe that the combination sufficiently stresses the possible spread compression that can occur in this portfolio.

Fees Contractually, the issuer is obliged to pay periodic fees to various parties providing services to the transaction such as servicers, trustees, and cash managers, among others. We accounted for these in our analysis. In particular, we applied a stressed servicing fee of 0.40% (the higher of 1.5x actual fees and 0.40% of the pool balance) to account for the potential increase in costs to attract a replacement servicer, based on our global RMBS criteria.

Set-off There are no employee loans or deposit set-off exposure in the transaction.

Default and recovery timings We used the WAFF and WALS derived in our credit analysis as inputs in our cash flow analysis (see table 5). At each rating level, the WAFF specifies the total balance of the mortgage loans we assume will default over the transaction's life. We apply defaults on the outstanding balance of the assets as of the closing date. We simulate defaults following

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© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the 2483578 last page. New Issue: Together Asset Backed Securitisation 2020-1 PLC two paths (i.e., one front-loaded and 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.

Table 5 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

We assume recoveries on the defaulted assets will be received 12 months after default for first-lien BTL properties, 18 months after default for first-lien owner-occupied properties, and 21 months after default for second-lien loans. We estimated foreclosure costs at 3% of the repossession value and £5,000 for first-lien and £7,000 for second-lien.

Our loss severities are based on loan principal and do not give any credit to the recovery of interest accrued on the loan during the foreclosure process.

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

Prepayments To assess the impact on excess spread and the absolute level of defaults in a transaction, we model both high and low prepayment scenarios at all rating levels (see table 6). There is a high proportion of fixed-rate loans having a discount period ending in 2021, which could increase prepayments and reduce the asset yield. We have considered this in our cash flow analysis by conducting a sensitivity run with higher prepayments.

Table 6 Prepayment Assumptions

High Low Pre-recession 30.0 4.0 During recession 3.0 3.0 Post-recession 30.0 4.0

Interest rates We modeled two interest rate scenarios in our analysis: up and down.

We derived the stressed interest rate curves for compounded SONIA by subtracting a spread of 0.15% from the LIBOR curves we model. There has been a close relationship between the backward-looking compounded SONIA and the forward-looking LIBOR determined for the same period. However, since SONIA does not include the various risk

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© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the 2483578 last page. New Issue: Together Asset Backed Securitisation 2020-1 PLC premiums reflected in LIBOR, the former has generally been lower. The spread adjustment applied to the interest rate reflects the lower SONIA rates historically observed.

Summary Combined, the default timings, recession timings, interest rates, and prepayment rates described above give rise to eight different scenarios at each rating level (see table 7).

Table 7 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 on our ratings on the notes. We ran two stress scenarios to demonstrate the rating transition of a note, and the results are in line with our credit stability criteria.

Counterparty Risk

The issuer is exposed to Elavon Financial Services DAC, UK Branch as the transaction account provider, National Westminster Bank PLC as the servicer's collection account, and HSBC Bank PLC as swap counterparty (see table 8). The documented replacement mechanisms adequately mitigate the transaction's exposure to counterparty risk in line with our current counterparty criteria for the transaction account and swap counterparty.

Table 8 Supporting Ratings

Current counterparty Minimum eligible Remedy period (calendar Maximum Institution/role rating counterparty rating days) supported rating National Westminster Bank PLC as A/Negative/A-1 'BBB/A-2' or 'BBB+' (if 35 AAA collection account provider no short-term rating) Elavon Financial Services DAC, UK AA-/Stable/A-1+ 'A/A-1' or 'A+' (if no 30 AAA Branch* as transaction account short-term rating) provider HSBC Bank PLC as swap AA-/--/A-1+ ** 'A-' 10 business days to post AAA counterparty collateral and 90 calendar days to find a replacement

*Rating derived from the rating on the parent entity. **Resolution counterparty rating.

Sovereign Risk

Our long-term unsolicited credit rating on the U.K. is 'AA'. Therefore, our ratings in this transaction are not constrained by our structured finance ratings above the sovereign criteria.

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Surveillance

We will maintain surveillance on the transaction until the notes mature or are otherwise retired. To do this, we will analyze regular servicer reports detailing the performance of the underlying collateral, monitor supporting ratings, and make regular contact with the servicer to ensure that it maintains minimum servicing standards and that any material changes in the servicer's operations are communicated and assessed.

Appendix

Transaction Participants

Role Participant Arrangers BNP Paribas and HSBC Bank PLC Cash administrator Together Financial Services Ltd. Corporate services provider CSC Capital Markets UK Ltd. Issuer Together Asset Backed Securitisation 2020-1 PLC Joint lead managers BNP Paribas, HSBC Bank PLC, Barclays Bank PLC, Natixis Originator/legal holder Together Personal Finance Ltd. and Together Commercial Finance Ltd. Principal paying agent/agent bank Elavon Financial Services DAC, UK Branch Registrar Elavon Financial Services DAC Security trustee U.S. Bank Trustees Ltd. Sellers Together Personal Finance Ltd. and Together Commercial Finance Ltd. Servicers Together Personal Finance Ltd. and Together Commercial Finance Ltd. Standby servicer Link Mortgage Services Ltd. Note trustee U.S. Bank Trustees Ltd. Share trustee CSC Corporate Services (UK) Ltd. Standby cash administrator facilitator CSC Capital Markets UK Ltd.

Related Criteria

• 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: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015

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• Criteria - Structured Finance - General: Global Framework For Cash Flow Analysis Of Structured Finance Securities, Oct. 9, 2014

• 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

• Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012

• General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012

• General Criteria: Methodology: Credit Stability Criteria, May 3, 2010

• Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009

Related Research

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

• Residential Mortgage Market Outlooks Updated For 13 European Jurisdictions Following Revised Economic Forecasts, May 1, 2020

• Sovereign Risk Indicators, April 24, 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

• How Much Is Enough? Information Quality Standards For The EMEA RMBS And ABS Rating Process, Jan. 8, 2019

• 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

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