Approximately GBP 2.85 billion of debt securities rated
London, 07 April 2011 -- Moody's Investors Service assigned provisional credit ratings to the following
classes of notes issued by Permanent Master Issuer PLC:
USD Series 1 Class A1 Notes due 2042, Assigned (P)Aaa (sf)
GBP Series 1 Class A2 Notes due 2042, Assigned (P)Aaa (sf)
EUR Series 1 Class A3 Notes due 2042, Assigned (P)Aaa (sf)
EUR Series 2 Class A1 Notes due 2042, Assigned (P)Aaa (sf)
GBP Series 2 Class A2 Notes due 2042, Assigned (P)Aaa (sf)
GBP Series 2 Class A3 Notes due 2042, Assigned (P)Aaa (sf)
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 [11.6]% served as input parameters for Moody's 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
(i) the weighted average loan-to-value (LTV) of 62.7%
and (ii) the revolving nature of the pool.
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.
The provisional 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 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 Bank of Scotland plc ("BOS", Aa3 / P-1), originated
under the 'Halifax' brand. This represents the seventeenth issue
out of the Permanent Master Trust structure, and the eighth using
Permanent Master Issuer plc. At closing the Trust Property for
this transaction is expected to be approximately GBP [39] billion
of loans. The reserve fund will be funded to [11.6]
per cent of the total Funding 2 Notes outstanding at closing and the total
credit enhancement for the Aaa rated notes will be [13.0]
per cent.
The notes from this issuance include two features, which are also
present in series 2009-1, 2010-1 and 2010-2,
but are not in any other issuances of the trust:
- Part of the interest coupon is payable out of the revenue waterfall
as normal with the remainder payable via a dedicated yield reserve which
is funded up front by BOS through a subordinated loan.
- At the step-up date, in January 2014 for Series
1 Class A Notes and in January 2016 for Series 2 Class A Notes,
Lloyds TSB Bank plc ("Lloyds TSB", Aa3 / P-1) will offer
to purchase any outstanding notes at a price of par plus accrued interest
less any outstanding Aaa PDL. The likelihood of this offer occurring
and the ability of Lloyds TSB to exercise it have not been assessed as
part of the assigned ratings.
The V Score for this transaction is Low/Medium, which is in line
with the score assigned for the UK Prime RMBS sector. Although
in line with the V Score for other prime UK RMBS Moody's noted the unavailability
of certain loan-by-loan information such as the Employment
Type and the Fast Track indicator. However, this is partially
mitigated by the conservative view of these characteristics assumed in
the analysis and depth and quantity of historical performance data provided
by the originator. 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 [11.6]% to [18.6]%, the
model output indicates that the class A notes would still achieve Aaa
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, Cash Flow Analysis
in EMEA RMBS: Testing Structural Features with the MARCO Model published
in January 2006, Moody's RMBS Master Trust Cash Flow Analysis published
in April 2008 and Global Structured Finance Operational Risk Guidelines:
Moody's Approach to Analyzing Performance Disruption Risk, published
in March 2011.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction.
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, 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.
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
Vice President - Senior 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.
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United Kingdom
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Moody's Investors Service assigns provisional ratings to 6 classes of UK RMBS notes to be issued by Permanent Master Issuer PLC:
