Moody's Assigns Provisional Ratings to Notes Issued by Eurosail-UK 2007-1NC plc
GBP 700 million of Debt Securities Rated
London, 08 February 2007 -- Moody's Investors Service ("Moody's") has today assigned
provisional long-term credit ratings to the Notes to be issued
by Eurosail-UK 2007-1NC plc:
- (P)Aaa to the Class A1 Mortgage Backed Floating Rate Notes due
- (P)Aaa to the Class A2 Mortgage Backed Floating Rate Notes due
- (P)Aaa to the Class A3 Mortgage Backed Floating Rate Notes due
- (P)Aaa to the Class A3c Detachable Coupons due ;
- (P)Aa2 to the Class B Mortgage Backed Floating Rate Notes due
- (P)A2 to the Class C Mortgage Backed Floating Rate Notes due
- (P)Baa2 to the Class D1 Mortgage Backed Floating Rate Notes due
- (P)Ba1 to the Class E1c Mortgage Backed Floating Rate Notes due
Moody's has not assigned ratings to the Class DTc, ETc or FTc Notes.
It is anticipated that the Class A1, Class A2, Class A3,
Class B, Class C and Class D1 Notes will be issued in U.S.
Dollars, Sterling and/or Euros, subject to market demand.
The final currency denominations within each separate class of note will
rank pari passu with each other in all respects. The currency risk
will be covered via various currency swaps with one or more swap counterparties.
The provisional ratings are based, inter alia, on the sterling
equivalent split of the Notes being as follows (in percentage of the total
Notes issuance excluding the Class DTc, Class ETc and Class FTc
- Class A1 [31.00]%
- Class A2 [21.80]%
- Class A3 [33.00]%
- Class B [6.40]%
- Class C [4.05]%
- Class D1 [2.95]%
- Class E1c [0.80]%
This is the fifth securitisation under the Eurosail name. The collateral
includes loans from Southern Pacific Mortgage Limited ("SPML"),
Southern Pacific Personal Loans Ltd, ("SPPL"),
Preferred Mortgages Ltd. ("PML"), and London
Mortgage Company ("LMC") and London Personal Loans Ltd.
("LPL") branded loans. Capstone Mortgage Services Limited
("Capstone"), a wholly-owned subsidiary of Lehman Brothers,
is the primary mortgage servicer and cash/bond administrator to the transaction.
Homeloan Management Ltd (SQ2), a wholly-owned subsidiary
of Skipton Building Society (A3, Prime-1), is the standby
mortgage servicer and standby cash/bond administrator.
Investors in the Class A3c Detachable Coupons ("DAC") do not receive any
payments of principal, and will be paid interest at a rate of [1.0]%
for quarters 1 to 4, increasing to [1.35]% in
quarter 5, [1.48]% in quarter 6, [2.00]%
in quarter 7, [2.43]% in quarters 8 and 9,
[2.56]% in quarter10, [2.90]%
in quarter 11 and [3.24]% in quarter 12, calculated
on the sterling equivalent of the outstanding balance of the Class A1,
A2 and A3 Notes.
The structure of this transaction is similar to that of Eurosail 2006-3NC.
The Issuer has entered into a fixed/floating rate swap agreement to mitigate
the potential variations between mortgage loan LIBOR and the loans in
the pool that carry fixed interest rates. In Eurosail-UK
2007-1NC, however, there are two such swaps,
one for the short-term LIBOR and BBR fixed rate loans [63.3%]
and one for the fixed rate loans that are fixed for life [6.6%].
Under these swap agreements, the Issuer will pay the interest received
from the fixed rate loans and will receive from the swap counterparty
LIBOR plus a margin determined at closing over the average of the aggregate
of the principal balances of the fixed rate loans in the mortgage pool
as of the second business day of each of the calendar months falling during
the interest period.
This transaction also incorporates a BBR-LIBOR swap to hedge the
basis risk resulting from the BBR loans included in the pool (there were
no such loans in Eurosail 2006-3) that are linked to the BBR rate
while the Notes pay LIBOR. Under this swap, the Issuer pays
the weighted average BBR rate plus 18.5 bps. p.a.
and receives LIBOR on the BBR notional amount.
Like Eurosail 2006-3NC, this transaction has turbo notes
(Classes DTc, ETc and FTc) that are not backed by mortgage collateral
but will be paid back instead by available excess spread. Moody's
is not rating these Notes.
At the closing date, the transaction will incorporate a cash reserve
to mitigate the reduced interest rate on discounted loans during the first
year. A fixed cash amount will be withdrawn from the Discount Margin
Reserve Ledger on each of the first four Interest Payment Dates (1st IPD
GBP[4,300,750], 2nd IPD GBP[3,679,672],
3rd IPD GBP[3,488,298] and 4th IPD GBP[3,348,435])
and will flow through the revenue waterfall as available revenue.
The provisional ratings of the A Notes, the B Notes, the C
Notes, the D1 Notes and the E1c Notes are based upon an analysis
of the characteristics of the mortgage pool backing the Notes, the
protection the Notes receive from credit enhancement against defaults
and arrears in the mortgage pool, and the legal and structural integrity
of the issue. A level of protection to investors in the Notes will
be the Reserve Fund, which on closing will equal GBP[4,550,000]
or [0.65]% of the initial pool balance.
The provisional ratings address the expected loss posed to investors by
the legal final maturity. In Moody's opinion, the structure
allows for the timely payment of interest and ultimate payment of principal
by the legal final maturity. Moody's issues provisional ratings
in advance of the final sale of securities, and these ratings only
represent Moody's preliminary opinion. Upon a conclusive review
of the transaction and associated documentation, Moody's will endeavor
to assign definitive ratings to the Notes. A final rating may differ
from a prospective rating.
Please contact Moody's Client Service Desk at +44-20-7772
5454 or www.moodys.com for further information or to receive
a copy of the Presale Report of this transaction.
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Vice President - Senior Analyst
Structured Finance Group
Moody's Eastern Europe
Telephone: +7 495 641-1881
Facsimile: +7 495 641-1897