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03 Oct 2014
London, 03 October 2014 -- Moody's Investors Service has determined that the proposed restructuring
if implemented, will not, in and of itself and at this time,
result in a downgrade or withdrawal of the current ratings of the notes
(the "Notes") issued by Silverstone Master Issuer PLC (the "Issuer").
Moody's opinion addresses only the credit impact of the Proposal,
and Moody's is not expressing any opinion as to whether the Proposal
has, or could have other, non-credit related effects
that may have a detrimental impact on the interests of note holders and/or
The components to the proposed restructuring are as following:
1. Amendment to the account bank structure
It is proposed to convert the Mortgage Trustee GIC Account to a collateralised
GIC account and to modify the Funding GIC Account by establishing an additional
account, the Funding Collateralised GIC Account. The Funding
GIC Account is required to hold a minimum amount of funds to ensure the
timely payment of interest on the rated notes and payment of senior fees
at the next interest payment date, amounts held in the reserve and
liquidity account, amounts accumulated for the repayment of Money
Market notes and amounts due on notes with a final maturity date within
two years. Any amount that is not required to be held in the Funding
GIC Account can be transferred to the Funding Collateralised GIC Account.
Such funds would remain in the Funding Collateralised GIC Account until
the next payment date and could include all principal accumulated for
the repayment of non-Money Market notes and any revenue amount
that is in excess to the amounts required to be held in the Funding GIC
Account. All amounts received in the Mortgage Trustee GIC Account
will be subject to collateralization once the account banks is rated below
A3. The Funding Collateralised GIC Account and Mortgage Trustee
GIC Account will not be required to replace themselves upon a rating event
but are required to post collateral in the form of sovereign bonds or
subordination. The Funding GIC Account will remain obligated to
replace themselves upon loss of A2/ P-1. In the case for
the Mortgage Trustee GIC Account the removal of the transfer obligation
is replaced by the obligation to appoint a stand-by Mortgage Trustee
Account Bank if the rating of the account banks is below A3. The
Account Bank criteria are in line with those specified in "The Temporary
Use of Cash In Structured Finance Transactions: Eligible Investment
and Bank Guidelines" published on March 2013. However, Moody's
notes that there is linkage to the Mortgage Trustee GIC Account bank.
In the event funds held in the Mortgage Trustee GIC Account are not accessible
prior to an IPD, the transaction relies exclusively on proceeds
accumulation over the previous two months and the reserve funds being
sufficiently funded to ensure timely payment of interest under the notes.
2. Amendments to authorized investments/ Establishment of Panel
The definition of Authorised Investments is proposed to be amended to
include Aaa rated money market funds. In addition, a panel
bank arrangement is proposed whereby funds held in the funding account
can be invested up to the next IPD with banks that are at least rated
P-1 and A2. The panel bank process as well as the amendments
to the Authorised Investments and criteria are in line with the Eligible
Investments specified in "The Temporary Use of Cash In Structured Finance
Transactions: Eligible Investment and Bank Guidelines" published
on March 2013.
3. Amendments to the redirection of the direct debits
At present, if the servicer is downgraded below P-1 all direct
debits made into the collection account are required to be redirected
to an appropriately rated bank. It is proposed that this requirement
for redirection is removed. Moody's notes that around 77%
of the borrowers within the Silverstone pool pay via direct debit and
that there is a daily sweep for direct debits from the Collection Account
into the Mortgage Trustee GIC Account.
4. Removal of collateral from the trust.
The Proposal contains a reduction of the current pool by approximately
30% through the removal of GBP5.5bn of fixed rate loans,
and an additional reduction of GBP2.6bn random selected loans.
5. Cancellation of retained note.
As part of the restructuring proposal GBP9.5bn corresponding
to Class 3A1, 3A2, 3A3, 3Z1, 3Z2 and 3Z3 of the
2011-1 issuance, fully retained by the originator,
are to be redeemed.
6. Amendment to the addition of new loans conditions
Under the Proposal the Issuers will remove the Seller rating triggers
that must be satisfied to add new loans to the pool. The removal
of these triggers would allow the seller to add new assets to the pool
until a insolvency event of the Seller occurs. However, the
Seller would remain obligated to issue a solvency certificate for each
addition if their short term rating falls below P-1.
7. Amendment to the Minimum Seller Share calculation
The minimum seller share, currently sized at 6% of the pool
balance, is in place to protect the notes against certain transactions
risks such as the risk of borrowers exercising any set-off rights
or making additional drawings under the flexible loans. The proposal
will result in a more dynamic calculation by sizing the deposit set-off
risk to cover the deposit above the government guaranteed amount.
Moody's notes that such sizing may not be sufficient to cover for
full deposit set-off risk in all cases as borrowers that are not
entitled to full compensation may choose not to claim under the guarantee
scheme as detailed in "Moody's Approach to Assessing Set-off
Risk for EMEA Securitisation and Covered Bonds Transactions" published
on October 2013.
8. Amendment to the servicer replacement condition
Under the Proposal, in the event the servicer is downgraded below
Baa3, a back-up servicer will be appointed instead of appointing
a new servicer. As a result the servicer would continue to act
as the servicer until there is a servicer termination event.
9. Amendment to the variable rate swaps
At present there are four swaps covering fixed rate loans, mortgage
loans linked to Nationwide's standard mortgage rate ("SMR"),
the base mortgage rate ("BMR"), or the Bank of England
bank base rate ("BBR"). These swap are typically required
to post collateral upon a P-1 trigger breach and to replace themselves
upon a P-2 trigger breach. The Proposal seeks to remove
the collateral and replacement triggers for the SMR and BMR swaps detailed
in the respective swap documentation. The Proposal also includes
provisions for the servicer to set rates on the variable rate loans (SMR
& BMR) at or above a specific rate to ensure a minimum yield on these
loans. The Tracker swap is proposed to be removed completely.
10. Introduction of a back-up cash manager
It is proposed to appoint a back-up cash manager upon the cash
manger being rated below Baa3.
11. Changes to the Issuer Account Bank transfer requirement
The issuer account bank is currently required to be transferred upon loss
of P-1. It is proposed to change the transfer requirement
to upon a loss of A3.
Moody's considers the amendments, if implemented, would not,
in and of itself and at this time, result in a downgrade or withdrawal
of the current ratings of the Notes issued by the Issuers.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in March 2014.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's will continue monitoring the ratings. Any change in the
ratings will be publicly disseminated by Moody's through appropriate media.
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
London E14 5FA
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's: No Rating impact following amendments to Silverstone Master Issuer
Moody's Investors Service Ltd.
One Canada Square
London E14 5FA
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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