GBP 2.89 billion of debt securities affected
London, 20 October 2015 -- Moody's Investors Service has assigned definitive credit ratings to the
following notes issued by Permanent Master Issuer PLC:
....USD 400,000,000 Series 1 Class
A1 Notes due 2042, Definitive Rating Assigned Aaa (sf)
....GBP 250,000,000 Series 1 Class
A2 Notes due 2042, Definitive Rating Assigned Aaa (sf)
....EUR 500,000,000 Series 1 Class
A3 Notes due 2042, Definitive Rating Assigned Aaa (sf)
....GBP 1,000,000,000 Series 1 Class A4 Notes due
2042, Definitive Rating Assigned Aaa (sf)
....GBP 370,000,000 Series 1 Class
B Notes due 2042, Definitive Rating Assigned Aa2 (sf)
....GBP 270,000,000 Series 1 Class
M Notes due 2042, Definitive Rating Assigned A2 (sf)
....GBP 370,000,000 Series 1 Class
C Notes due 2042, Definitive Rating Assigned Baa2 (sf)
Moody's also affirms the existing ratings of notes issued by Permanent
Master Issuer plc.
RATINGS RATIONALE
The notes are backed by a pool of prime UK residential mortgages originated
by Bank of Scotland plc ("BOS", A1/ P-1), originated
under the 'Halifax' brand. This represents the twentieth issue
out of the Permanent Master Trust structure, and the eleventh using
Permanent Master Issuer plc. At closing the trust property for
this transaction is approximately GBP 17.7 billion of loans.
The reserve fund will be funded to 2.29% of the combined
total of the Funding 2 Rated Notes and Z Loan outstanding at closing and
the total credit enhancement for the Aaa (sf) rated notes will be 20.0%.
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the portfolio
expected loss and MILAN Credit Enhancement (CE), as well as the
transaction structure.
The portfolio expected loss of 1.0% of the portfolio balance
at closing (Permanent Master Issuer PLC Series 2013-1: 1.3%)
is in line with the UK Prime sector average of 1.0% and
takes into account (i) the performance of the seller's precedent transactions,
(ii) benchmark with comparable transactions in the UK market and (iii)
the current economic conditions in the UK. The decrease in the
expected loss since the prior issuance reflects the repurchase in December
2014 of around 2.5% non-performing loans, which
resulted in three-months arrears decreasing to 0.24%
from 2.7%.
The MILAN CE of 10.0% at closing (Permanent Master Issuer
PLC Series 2013-1: 11.6%) is above the average
for other UK Prime RMBS Master Trusts and takes into account factors including
(i) the historic collateral performance as described above; (ii)
the weighted average current loan-to-value of 58.8%
which is in line with the sector average; (iii) 46.8%
of interest only loans and 4.45% of arrears loans;
and (iv) the revolving nature of the pool. The decrease in the
MILAN CE since the prior issuance reflects the aforementioned removal
of loans more than three months in arrears and the reduction of the weighted
average current loan-to-value to 58.8% compared
with 66.4% for the previous issuance.
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.
If the portfolio expected loss was increased from 1.0% of
current balance to 3.0% of current balance, and the
MILAN CE was increased from 10.0% to 16.0%,
the model output indicates that the class A notes would achieve Aaa(sf)
assuming that all other factors remained equal.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in January 2015.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities 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:
Significantly different loss assumptions compared with our expectations
at close due to either a change in economic conditions from our central
scenario forecast or idiosyncratic performance factors would lead to rating
actions. For instance, should economic conditions be worse
than forecast, the higher defaults and loss severities resulting
from greater unemployment, worsening household affordability and
a weaker housing market could result in downgrade of the rating or an
upgrade in case the economic conditions were significantly better than
forecasted. Deleveraging of the capital structure or conversely
a deterioration in the notes available credit enhancement could result
in an upgrade or a downgrade of the rating, respectively.
Additionally counterparty risk could cause a downgrade of the rating due
to a weakening of the credit profile of a transaction counterparty.
Finally, unforeseen regulatory changes or significant changes in
the legal environment may also result in changes of the rating.
Loss and Cash Flow Analysis:
In rating this transaction, Moody's used a Master Trust model to
assess the cash flows and determine the loss for each tranche.
The cash flow model evaluates all default scenarios that are then weighted
considering the probabilities of the lognormal distribution assumed for
the portfolio default rate. In each default scenario, the
corresponding loss for each class of notes is calculated given the incoming
cash flows from the assets and the outgoing payments to third parties
and noteholders. Therefore, the expected loss or EL for each
tranche is the sum product of (i) the probability of occurrence of each
default scenario; and (ii) the loss derived from the cash flow model
in each default scenario for each tranche.
Stress Scenarios:
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
The rating addresses 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 ultimate payment of principal
with respect to 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.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF419365.
Moody's describes its loss and cash flow analysis in the section
"Ratings Rationale" of this press release.
Moody's describes the stress scenarios it has considered for this
rating action in the section "Ratings Rationale" of this press
release.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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.
Emily Rombeau
Analyst
Structured Finance Group
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
Michelangelo Margaria
Senior Vice President/Manager
Structured Finance Group
Telephone:+39-02-9148-1100
Releasing Office:
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 assigns definitive credit ratings to UK RMBS notes issued by Permanent Master Issuer PLC Series 2015-1
