Approximately GBP 1.2 billion of rated debt securities affected
London, 18 April 2011 -- Moody's Investors Service assigned definitive credit ratings to the following
classes of notes issued by Gosforth Funding 2011-1 plc:
GBP 200,000,000.00 Class A1a Notes, Assigned
Aaa (sf)
EUR 450,000,000.00 Class A1b Notes, Assigned
Aaa (sf)
GBP 546,100,000.00 Class A2 Notes, Assigned Aaa
(sf)
GBP 38,400,000.00 Class M Notes, Assigned Aa2
(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 legal considerations as assessed in Moody's
cash flow analysis.
The expected portfolio loss of 1.00% of original balance
of the portfolio at closing and the MILAN Aaa required Credit Enhancement
of 6.50% served as input parameters for Moody's cash flow
model, which is based on a probabilistic lognormal distribution
as described in the report "The Lognormal Method Applied to ABS Analysis",
published in September 2000.
The key drivers for the portfolio expected loss are (i) benchmarking with
comparable transactions in the UK market via analysis of book data provided
by the seller and (ii) the current economic conditions in the UK in combination
with historic recovery data on foreclosures.
The key drivers for the MILAN Aaa Credit Enhancement number, which
is in line with other prime UK RMBS transactions, are (i) the weighted
average current loan-to-value (CLTV) of 57.8%
based on initial valuations and 53.3% based on latest valuations,
which compares favourably with other UK RMBS transactions and (ii) the
ability for product switches from repayment to interest only to remain
in the pool.
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 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 Northern Rock plc (now Northern Rock Asset Management) and transferred
to the newly created Northern Rock entity. At closing the mortgage
pool balance will consist of approximately GBP 1.3 billion of loans.
The reserve fund will be initially funded to 2.0% of the
pool balance and will amortise subject to conditions. The total
credit enhancement for the Class A1 and Class A2 notes will be 13.0%.
The transaction also benefits from an amortising liquidity reserve,
which will be funded to 1.75% of the pool balance at closing.
The V Score for this transaction is Low/Medium, which is in line
with the score assigned for the UK Prime RMBS sector. The main
drivers of the V Score for this transaction are the below average performance
of the Granite Master Trust, which shared a common loan originator
with this transaction, and the fact that the newly created Northern
Rock entity is not rated by Moody's and is performing the duties of the
seller, servicer, cash manager, and swap counterparty
in the transaction (subject to the back up servicer and cash manager provisions
and the stand-by swap). In addition, the stand by
swap covers only BBR-linked and fixed rate loans and does not cover
loans linked to the Standard Variable Rate of the Northern Rock.
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: At the time the rating was assigned,
the model output indicated that all Class A Notes would have achieved
a Aaa even if the expected loss was as high as 3.0% and
the MILAN Aaa CE was as high as 9.1% and all other factors
were constant. 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 Cash Flow Analysis
in EMEA RMBS: Testing Structural Features with the MARCO Model published
in January 2006.
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, 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.
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
Olga Gekht
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.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service has assigned definitive ratings to 4 classes of UK RMBS notes issued by Gosforth Funding 2011-1 plc, UK RMBS
