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Rating Action:

Moody's Investors Service assigns Aaa (sf) to RMBS Notes issued by Permanent Master Issuer PLC Series 2018-1

28 Jun 2018

London, 28 June 2018 -- Moody's Investors Service ("Moody's") has assigned definitive credit ratings to the following notes issued by Permanent Master Issuer PLC Series 2018-1:

....US$ 1,000M 2018-1 Series 1 Class A1 Notes due 2058, Definitive Rating Assigned Aaa (sf)

....GBP 500M 2018-1 Series 1 Class A2 Notes due 2058, Definitive Rating Assigned Aaa (sf)

....GBP 1,000M 2018-1 Series 1 Class A3 Notes due 2058, Definitive Rating Assigned Aaa (sf)

Affirmations:

Moody's also affirms the ratings on all the outstanding notes issued by Permanent Master Issuer PLC.

RATINGS RATIONALE

The notes are backed by a pool of prime UK residential mortgages originated by Bank of Scotland plc ("BOS", Aa3/ P-1), under the 'Halifax' brand. This represents the twenty first issue out of the Permanent Master Trust structure, and the twelfth using Permanent Master Issuer plc. At the cut-off, the trust property for this transaction is approximately GBP 10.25 billion of loans as at end of March 2018. The reserve fund will be funded to 2.0% of the combined total of the Funding 2 Rated Notes and Z Loan outstanding at closing and the total credit enhancement for the Aaa (sf) rated notes will be 17.0%.

The ratings of the notes take into account the credit quality of the underlying mortgage loan pool, from which Moody's determined the portfolio expected loss and MILAN Credit Enhancement (CE), as well as the transaction structure.

The portfolio expected loss of 1.0% of the portfolio balance at closing is in line with the UK Prime sector average of 1.0% and takes into account (i) the performance of the seller's precedent transactions, (ii) benchmark with comparable transactions in the UK market and (iii) the current economic conditions in the UK.

The MILAN CE of 8.0% at closing is in line with the UK Prime sector average and takes into account factors including (i) the historic collateral performance; (ii) the weighted average current loan-to-value of 55.73% which is in line with the sector average; (iii) 50.5% of interest only loans and 3.2% of arrears loans; and (iv) the revolving nature of the pool.

Moody's Parameter Sensitivities provide a quantitative/model-indicated calculation of the number of rating notches that a Moody's structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged and is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might have differed if key rating input parameters were varied. Parameter Sensitivities for the typical EMEA RMBS transaction are calculated by stressing key variable inputs in Moody's primary rating model. If the portfolio expected loss was increased from 1.0% of current balance to 3.0% of current balance, and the MILAN CE was increased from 8.0% to 16.0%, the model output indicates that the Class A Notes would achieve Aaa (sf) assuming that all other factors remained equal.

Factors that would lead to a downgrade of the ratings:

Significantly different loss assumptions compared with our expectations at close due to either a change in economic conditions from our central scenario forecast or idiosyncratic performance factors would lead to rating actions. For instance, should economic conditions be worse than forecast, the higher defaults and loss severities resulting from greater unemployment, worsening household affordability and a weaker housing market could result in downgrade of the ratings. Deterioration in the notes available credit enhancement could result in a downgrade of the ratings, respectively. Additionally, counterparty risk could cause a downgrade of the ratings due to a weakening of the credit profile of a transaction counterparty. Finally, unforeseen regulatory changes or significant changes in the legal environment may also result in changes of the ratings.

The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in September 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Please see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further information on Moody's analysis at the initial rating assignment and the on-going surveillance in RMBS.

Loss and Cash Flow Analysis:

In rating this transaction, Moody's used a Master Trust model to assess the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the lognormal distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario; and (ii) the loss derived from the cash flow model in each default scenario for each tranche.

Stress Scenarios:

As such, Moody's analysis encompasses the assessment of stressed scenarios.

The ratings address the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal with respect to the notes by the legal final maturity. Moody's ratings only address the credit risk associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1131290.

Moody's describes its loss and cash flow analysis in the section "Ratings Rationale" of this press release.

Moody's describes the stress scenarios it has considered for this rating action in the section "Ratings Rationale" of this press release.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Maria Divid
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Olga Gekht
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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