Approximately GBP 2.3 billion equivalent of rated debt securities affected
London, 12 November 2010 -- Moody's Investors Service has assigned definitive credit ratings to the
following classes of Notes to be issued by Holmes Master Issuer PLC:
Issuer: Holmes Master Issuer Series 2010-1
USD 500,000,000 Class A1 Notes due 2011, Assigned P-1
(sf)
USD 900,00,000 Class A2 Notes due 2054, Assigned Aaa
(sf)
EUR 500,000,000 Class A3 Notes due 2054, Assigned Aaa
(sf)
EUR 750,000,000 Class A4 Notes due 2054, Assigned Aaa
(sf)
GBP 375,000,000 Class A5 Notes due 2054, Assigned Aaa
(sf)
Moody's also affirms the existing ratings of notes issued by Holmes Master
Issuer plc
RATINGS RATIONALE
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the MILAN Aaa
Credit Enhancement and the portfolio expected loss, as well as the
transaction structure and any legal considerations as assessed in Moody's
cash flow analysis. The expected portfolio loss of 1.0%
of original balance of the portfolio at closing and the MILAN Aaa required
Credit Enhancement of 9.60% served as input parameters for
the cash flow model, which is based on a probabilistic lognormal
distribution as described in the report "Moody's RMBS Master Trust Cash
Flow Analysis", published in April 2008. The key drivers
for the MILAN Aaa Credit Enhancement number, which is in line with
other prime UK RMBS Master Trust transactions, are the weighted
average loan-to-value (LTV) of 66.4%,
the average seasoning of over three years, and three month arrears
of 1.63%.
The key drivers for the portfolio expected loss are (i) the performance
of the seller's precedent transactions, (ii) benchmarking with comparable
transactions in the UK market and (iii) the current economic conditions
in the UK in combination with limited performance data provided by the
seller. Given the historical performance of the UK RMBS market
and the originator's precedent transactions, Moody's believes the
assumed expected loss is appropriate for this transaction.
The long-term ratings on the A2, A3, A4 and A5 notes
address the expected loss posed to investors by the legal final maturity.
The short term rating on the A1 notes addresses the probability of default
by the legal final maturity. In Moody's opinion, the structure
allows for timely payment of interest and principal with respect of 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.
The notes are backed by a pool of prime UK residential mortgages originated
by Santander UK plc ("Santander UK", Aa3 / P-1). This
represents the seventeenth issue out of the Holmes Master Trust structure.
At closing the Trust Property for this transaction will consist of approximately
GBP 14 billion of loans. No new loans have been added at the time
of this issuance. The reserve fund is funded to 4.6%
of the total notes outstanding at closing and the total credit enhancement
for the Class A notes is 14.0%. As part of the issuance,
Santander have restructured the trust to:
1. include unrated Z notes which in line with other trusts will
rank below the reserve fund for principal and interest;
2. remove the second and third reserve funds following the redemption
of the currently outstanding 2007-1 and 2007-2 notes.
These reserve funds are currently not funded but would potentially have
been able to trap cash to pay any note interest should the asset margin
have fallen below 65 bps (second reserve fund) and to pay Class A Note
interest in low CPR scenarios (third reserve fund); and
3. removal of cashflow rules 4 and 5. Previously cashflow
rule 4 restricted the payment of amounts to scheduled amortisation and
pass through notes during bullet note accumulation, whilst cashflow
rule 5 limited the amount payable to a pass through note whilst other
notes were due and payable. These rules have been consolidated
into a new cashflow rule. As was proposed at the P-rating
date other rules have been amended so that bullet and scheduled amortisation
notes now rank in priority to pass-through notes.
The Series 2010-1 notes are limited recourse and in combination
with the cash collateralisation of the existing notes via a redemption
reserve means that the recent UK High Court judgment in BNP Corporate
Trustee Services Ltd v Eurosail UK 2007-3BL PLC concerning the
effect of post enforcement call options on the balance sheet insolvency
test (see Moody's press release of 19 August 2010) will not have any rating
impact for Holmes Master Issuer.
The V Score for this transaction is Low/Medium, which is in line
with the score assigned for the UK Prime RMBS sector mainly due to the
fact that it is a standard UK prime RMBS Master Trust transaction for
which we have over ten years of historical performance data. The
only component of the V score that differs from the UK sector score is
2.1 Quality of Historical Data for the Issuer/Sponsor/ Originator,
which has been assessed as Low/Medium, given the originator has
provided more limited data in respect of historic performance data than
some of the other prime lenders. In Moody's views the current transactions
are however performing in line with expectations. V Scores are
a relative assessment of the quality of available credit information and
of the degree of dependence on various assumptions used in determining
the rating. High variability in key assumptions could expose a
rating to more likelihood of rating changes. The V-Score
has been assigned accordingly to the report "V-Scores and Parameter
Sensitivities in the Major EMEA RMBS Sectors" published in April 2009.
Moody's Parameter Sensitivities: If the portfolio expected loss
was increased from 1.0% of current balance to 3.0%
of current balance, and the Milan Aaa Credit Enhancement was increased
from 9.6% to 15.4%, the model output
indicates that the class A notes would still achieve Aaa assessment assuming
that all other factors remained equal. 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.
The principal methodologies used in this rating were Moody's Approach
to Rating UK RMBS published in April 2005, Moody's Updated Methodology
for Rating UK RMBS published in September 2009 and Moody's RMBS Master
Trust Cash Flow Analysis published in April 2008.
Moody's Investors Service received and took into account a third party
due diligence report on the underlying assets or financial instruments
in this transaction and the due diligence report had a neutral impact
on the rating.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information and confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
The reports mentioned above are available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Additional research, including the pre-sale report for this
transaction and reports for prior transactions, are available at
www.moodys.com. In addition Moody's publishes a weekly
summary of structured finance credit, ratings and methodologies,
available to all registered of our website, at www.moodys.com/SFQuickCheck.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
London
Jonathan Livingstone
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Annabel Schaafsma
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
Moody's Investors Service assigns definitive credit ratings to 5 classes of UK RMBS notes issued by Holmes Master Issuer PLC
