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Rating Action:

MOODY'S ASSIGNS DEFINITIVE RATINGS TO RMBS ISSUED BY PROVIDE-A 2003-1 PLC

16 Oct 2003
MOODY'S ASSIGNS DEFINITIVE RATINGS TO RMBS ISSUED BY PROVIDE-A 2003-1 PLC

Approximately EUR 387.75 of Debt Securities Affected.

Frankfurt am Main, October 16, 2003 -- Moody's Investors Service has assigned the following definitive ratings to the Notes issued by Provide-A 2003-1 PLC:

- Aaa to the EUR 2,644,299,964 Senior Credit Default Swap,

- Aaa to the EUR 250,000 Class A+ Notes due 2055,

- Aaa to the EUR 155,000,000 Class A Notes due 2055,

- Aa2 to the EUR 117,800,000 Class B Notes due 2055,

- A2 to the EUR 65,100,000 Class C Notes due 2055, and

- Baa2 to the EUR 49,600,000 Class D Notes due 2055.

The structure is based on the KfW-sponsored Provide programme. In this programme, KfW provides credit protection on a specific reference portfolio of residential mortgage loans. KfW in turn hedges its exposure through a Senior Credit Default Swap, the issuance of certificates of indebtedness purchased by Provide-A 2003-1 PLC and a Junior Credit Default Swap (2.2 per cent).

In this transaction, Bayerische Hypo- und Vereinsbank ("HVB") sells credit risk on 30,675 reference claims with a current volume (as of cut-off) of approximately EUR 3.1 billion. HVB is the largest mortgage lender in Germany. The loans of Provide-A 2003-1 PLC have been originated by HVB in the course of its mortgage loan activity.

The transaction has certain positive features and certain less favourable aspects. Positive features include: (1) Tight definition of credit events, (2) The Aaa rating of KfW as the Note collateral provider, (3) Highly diversified portfolio with several thousands of borrowers throughout Germany, (4) Sound legal structure, similar to other Provide structures, (5) Credit enhancement provided through subordination of various Classes of Notes and the Junior CDS, and (6) HVB's historical experience as originator and servicer.

Less favourable aspects are: (1) The realised loss definition includes foreclosure costs and accrued interest (up to 4 per cent). Foreclosure costs do not include internal costs of HVB. The loss definition is reflected in the level of credit enhancement required. (2) Majority of reference claims feature high LTAV ratios, which leads to a higher expected default frequency and more severe losses. The increased risk is reflected in the determination of the credit enhancement. (3) Substantial portion of reference claims secured by investment properties that tend to have more volatile market value, thus resulting potentially in higher losses. Additionally, there are more defaults on investment properties than with regards to owner-occupied properties. Both facts have been incorporated in Moody's RMBS model and resulted in adjustments. (4) Large exposure (volume-wise) to multifamily borrowers/properties, which are assumed to behave worse in terms of default frequency and severity. Those properties/borrowers attract penalties in the model resulting in higher credit enhancement. (5) Limited availability of historical performance data relating to the residential mortgage loan portfolio in general and to this portfolio in particular. Although this is a common problem for the German market and HVB provided loss estimations for the last 3 years on a dynamic basis which are based on loan loss provisions for a residential mortgage sample pool, Moody's continues to expect such information, preferably on a static basis. Limited data availability is mitigated to a certain extent through assumptions, which are based on historical observations in the German and European markets.

Realised losses cover losses of principal, accrued interest (up to 4 per cent) and external foreclosure costs. The portfolio is static and will amortise sequentially, starting with the Class A+ Notes which rank pro-rata with the Senior Credit Default Swap. The legal final maturity is in July 2055.

To obtain a copy of Moody's New Issue Report, please see Moody's website www.moodys.com or contact our Client Service Desk in London (+44-20-7772 5454) or Paris (+33-1-5330 1020).

Frankfurt
Detlef Scholz
Managing Director
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 33 1 53 43 93 78 SUBSCRIBERS: 44 20 7772 5454

Frankfurt
Jens Lindner
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 33 1 53 43 93 78 SUBSCRIBERS: 44 20 7772 5454

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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