NOTE: On October 4, 2021, the press release was corrected as follows: In the Increase in Available Credit Enhancement section, item (iv) was changed to: “for tranches B1a and B1c of Eurosail-UK 2007-1NC PLC, to 43.65% from 41.1% last rating action, for tranche C1a to 22.7% from 21.4%, and for tranches D1a and D1c to 7.5% from 7.1%.” Revised release follows.
London, 28 September 2021 -- Moody's Investors Service, ("Moody's") has
today upgraded the ratings of 19 notes in 5 Eurosail deals. The
rating action reflects better than expected collateral performance and
the increased levels of credit enhancement for the affected notes.
Moody's affirmed the ratings of the notes that had sufficient credit enhancement
to maintain the current rating on the affected notes.
Issuer: Eurosail 2006-1 PLC
....EUR 20.7M Class B1a Notes,
Affirmed Aa1 (sf); previously on Feb 3, 2021 Affirmed Aa1 (sf)
....GBP 17.5M Class B1c Notes,
Affirmed Aa1 (sf); previously on Feb 3, 2021 Affirmed Aa1 (sf)
....EUR 13.6M Class C1a Notes,
Affirmed Aa1 (sf); previously on Feb 3, 2021 Upgraded to Aa1
(sf)
....GBP 16.5M Class C1c Notes,
Affirmed Aa1 (sf); previously on Feb 3, 2021 Upgraded to Aa1
(sf)
....EUR 26.4M Class D1a Notes,
Upgraded to Ba1 (sf); previously on Feb 3, 2021 Affirmed Caa1
(sf)
....GBP 3M Class D1c Notes, Upgraded
to Ba1 (sf); previously on Feb 3, 2021 Affirmed Caa1 (sf)
Issuer: Eurosail 2006-2BL PLC
....GBP 269.06M Class A2c Notes,
Affirmed Aa1 (sf); previously on Dec 21, 2018 Affirmed Aa1
(sf)
....EUR 27M Class B1a Notes, Affirmed
Aa1 (sf); previously on Dec 21, 2018 Affirmed Aa1 (sf)
....USD 18M Class B1b Notes, Affirmed
Aa1 (sf); previously on Dec 21, 2018 Affirmed Aa1 (sf)
....EUR 24.8M Class C1a Notes,
Upgraded to Aa2 (sf); previously on Dec 21, 2018 Upgraded to
A1 (sf)
....GBP 11M Class C1c Notes, Upgraded
to Aa2 (sf); previously on Dec 21, 2018 Upgraded to A1 (sf)
....EUR 9M Class D1a Notes, Upgraded
to Ba2 (sf); previously on Dec 21, 2018 Affirmed B2 (sf)
....GBP 17.3M Class D1c Notes,
Upgraded to Ba2 (sf); previously on Dec 21, 2018 Affirmed B2
(sf)
....GBP 7.38M Class E1c Notes,
Affirmed Caa3 (sf); previously on Dec 21, 2018 Affirmed Caa3
(sf)
Issuer: Eurosail 2006-3NC PLC
....EUR 48.8M Class B1a Notes,
Affirmed Aa1 (sf); previously on Dec 21, 2018 Upgraded to Aa1
(sf)
....EUR 20M Class C1a Notes, Upgraded
to Aa3 (sf); previously on Dec 21, 2018 Affirmed Ba3 (sf)
....GBP 9.85M Class C1c Notes,
Upgraded to Aa3 (sf); previously on Dec 21, 2018 Affirmed Ba3
(sf)
....EUR 6.05M Class D1a Notes,
Upgraded to B2 (sf); previously on Dec 21, 2018 Affirmed Caa3
(sf)
....GBP 11M Class D1c Notes, Upgraded
to B2 (sf); previously on Dec 21, 2018 Affirmed Caa3 (sf)
Issuer: Eurosail-UK 2007-1NC PLC
....EUR 194.8M Class A3a Notes,
Affirmed Aa1 (sf); previously on Feb 3, 2021 Affirmed Aa1 (sf)
....GBP 100M Class A3c Notes, Affirmed
Aa1 (sf); previously on Feb 3, 2021 Affirmed Aa1 (sf)
....EUR 36.9M Class B1a Notes,
Upgraded to Aa1 (sf); previously on Feb 3, 2021 Upgraded to
Aa2 (sf)
....GBP 20M Class B1c Notes, Upgraded
to Aa1 (sf); previously on Feb 3, 2021 Upgraded to Aa2 (sf)
....EUR 42.1M Class C1a Notes,
Upgraded to A1 (sf); previously on Feb 3, 2021 Affirmed Ba3
(sf)
....EUR 23.25M Class D1a Notes,
Upgraded to B3 (sf); previously on Feb 3, 2021 Affirmed Caa3
(sf)
....GBP 5M Class D1c Notes, Upgraded
to B3 (sf); previously on Feb 3, 2021 Affirmed Caa3 (sf)
Issuer: Eurosail-UK 2007-3BL PLC
....GBP 145.123185M Class A3a Notes,
Affirmed Aa1 (sf); previously on Feb 3, 2021 Affirmed Aa1 (sf)
....GBP 64.5M Class A3c Notes,
Affirmed Aa1 (sf); previously on Feb 3, 2021 Affirmed Aa1 (sf)
....GBP 10.150223M Class B1a Notes,
Upgraded to Aa1 (sf); previously on Feb 3, 2021 Upgraded to
Aa3 (sf)
....GBP 23M Class B1c Notes, Upgraded
to Aa1 (sf); previously on Feb 3, 2021 Upgraded to Aa3 (sf)
....GBP 16.97447M Class C1a Notes,
Upgraded to Ba2 (sf); previously on Feb 3, 2021 Affirmed B2
(sf)
....GBP 10M Class C1c Notes, Upgraded
to Ba2 (sf); previously on Feb 3, 2021 Affirmed B2 (sf)
The transactions are static cash securitisations of legacy non-conforming
mortgage loans secured on residential properties located in the UK.
RATINGS RATIONALE
The rating action is prompted by:
- decreased key collateral assumptions, namely the portfolio
Expected Loss (EL) and MILAN CE assumptions due to better than expected
collateral performance
- an increase in credit enhancement for the affected tranches
Revision of Key Collateral Assumptions:
As part of the rating actions, Moody's reassessed its lifetime loss
expectations and recovery rates for the portfolios reflecting their collateral
performance to date.
Despite relatively high delinquencies, the cumulative losses have
remained stable since last year. 90+ delinquencies are currently
standing at:
(i) for Eurosail 2006-1 PLC, 41.82%,
and cumulative losses at 4.23% up fom 4.22%
last year.
(ii) for Eurosail 2006-2BL PLC, 41.6%,
and cumulative losses at 4.94% up from 4.93%
last year.
(iii) for Eurosail 2006-3NC PLC, 52.07%,
and cumulative losses at 4.37% unchanged since last year.
(iv) for Eurosail-UK 2007-1NC PLC, 50.00%,
and cumulative losses at 5.63% up from 5.57%
last year.
(v) for Eurosail-UK 2007-3BL PLC, 37.8%,
and cumulative losses at 4.37% up from 4.36%
last year.
Moody's assumed the expected loss as a percentage of current pool balance
as follows:
(i) for Eurosail 2006-1 PLC, 5.97%.
(ii) for Eurosail 2006-2BL PLC, 6.43%.
(iii) for Eurosail 2006-3NC PLC, 8.51%.
(iv) for Eurosail-UK 2007-1NC PLC, 8.00%.
(v) for Eurosail-UK 2007-3BL PLC, 6.22%.
This corresponds to expected loss assumptions as a percentage of original
pool balance of:
(i) for Eurosail 2006-1 PLC, 4.89% changed
from 5.87%.
(ii) for Eurosail 2006-2BL PLC, 6.01% changed
from 7.10%.
(iii) for Eurosail 2006-3NC PLC, 5.55% changed
from 6.75%.
(iv) for Eurosail-UK 2007-1NC PLC, 7.18%
changed from 8.64%.
(v) for Eurosail-UK 2007-3BL PLC, 5.85%
changed from 7.25%.
Moody's has also assessed loan-by-loan information as a
part of its detailed transaction review to determine the credit support
consistent with target ratings levels and the volatility of future losses.
As a result, Moody's has decreased the MILAN CE assumption of each
transaction as follows:
(i) for Eurosail 2006-1 PLC, to 24% from 29%.
(ii) for Eurosail 2006-2BL PLC, to 24% from 27%.
(iii) for Eurosail 2006-3NC PLC, to 30% from 37%.
(iv) for Eurosail-UK 2007-1NC PLC, to 30% from
37%.
(v) for Eurosail-UK 2007-3BL PLC, to 24% from
25.5%.
The MILAN CE in these transactions is mainly driven by the Minimum Expected
Loss Multiple, a floor defined in Moody's methodology for rating
EMEA RMBS transactions.
The expected losses and MILAN CE assumptions are higher than average for
the sector due to higher delinquencies as well as adverse pool characteristics.
For example in Eurosail 2006-1 PLC, 36.5% of
the pool are interest-only loans, 74.12% of
the loans were provided to self-certified borrowers, and
21.05% of the pool was subject to one or more CCJs.
Increase in Available Credit Enhancement
Sequential amortization and non-amortizing reserve funds led to
the increase in the credit enhancement available in these transactions.
For instance, the credit enhancement for the tranches affected by
today's rating action increased:
(i) for tranches D1a and D1c of Eurosail 2006-1 PLC, to 10.39%
from 9.8% last rating action.
(ii) for tranches C1a and C1c of Eurosail 2006-2BL PLC, to
32.12% from 25.3% last rating action,
and for tranches D1a and D1c, to 9.3% from 7.3%.
(iii) for tranches C1a and C1c of Eurosail 2006-3NC PLC,
to 30.63% from 22.4% last rating action,
and for tranches D1a and D1c, to 9.4% from 6.8%.
(iv) for tranches B1a and B1c of Eurosail-UK 2007-1NC PLC,
to 43.65% from 41.1% last rating action,
for tranche C1a to 22.7% from 21.4%,
and for tranches D1a and D1c to 7.5% from 7.1%.
(v) for tranches B1a and B1c of Eurosail-UK 2007-3BL PLC,
to 29.28% from 27.4% last rating acton,
and for tranches C1a and C1c to 14.4% from 13.5%.
Moody's notes that some of the performance triggers in Eurosail
2006-3NC PLC, Eurosail-UK 2007-1NC PLC and
Eurosail-UK 2007-3BL PLC are breached and uncurable,
which means their waterfalls cannot revert to pro-rata amortization.
Moody's also considered how the liquidity available in the transactions
supports the ratings of the notes. In particular:
(i) for Eurosail 2006-1 PLC, a reserve fund of GBP 3.68M.
(ii) for Eurosail 2006-2BL PLC, a reserve fund of GBP 0.62M
and a liquidity facility of GBP 33.83M.
(iii) for Eurosail 2006-3NC PLC, a reserve fund of GBP 2.55M
and a liquidity facility of GBP 8.49M.
(iv) for Eurosail-UK 2007-1NC PLC, a reserve fund
of GBP 4.55M and a liquidity facility of GBP 16.26M.
(v) for Eurosail-UK 2007-3BL PLC, a reserve fund of
GBP 2.60M.
For Eurosail-UK 2007-3BL PLC, the ratings of tranches
C1a and C1c are constrained by the lack of liquidity available.
The servicer is an unrated entity and the transactions' mitigating
structural features are not sufficient to achieve the Aaa (sf) rating.
As a result, Financial Disruption Risk constrains the ratings of
Classes B1a and B1c of Eurosail-UK 2007-1NC PLC and of Eurosail-UK
2007-3BL PLC.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in December 2020 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1248130.
Alternatively, 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
a rating for an RMBS security 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.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the ratings
include (1) performance of the underlying collateral that is better than
Moody's expected, (2) an increase in available credit enhancement
and (3) improvements in the credit quality of the transaction counterparties
and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the ratings
include (1) an increase in sovereign risk (2) performance of the underlying
collateral that is worse than Moody's expected, (3) deterioration
in the notes' available credit enhancement and (4) deterioration in the
credit quality of the transaction counterparties.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
Lam Tran Ngoc
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
