London, 01 September 2010 -- Moody's Investors Service has assigned a definitive long-term rating
to the following series of covered bonds issued by Abbey National Treasury
Services plc (the issuer) under its covered bond programme:
- GBP 500m Floating Rate Covered Bonds due 2012: Aaa;
new rating
- GBP 500m Floating Rate Covered Bonds due 2013: Aaa;
new rating
- GBP 500m Floating Rate Covered Bonds due 2014: Aaa;
new rating
RATINGS RATIONALE
The covered bonds constitute direct, unconditional and senior obligations
of Abbey National Treasury Services plc and are secured by a pool of UK
residential mortgage loans (the cover pool).
The rating takes into account the following factors:
(1) The credit strength of the issuer (Aa3).
(2) The structure created by the transaction documents.
(3) The credit quality of the assets (the cover pool) securing the payment
obligations of the issuer under the covered bonds. All the loans
in the cover pool are backed by UK residential properties.
(4) The commitment of the issuer to maintain an asset percentage,
currently 90.7%, which translates into an over-collateralisation
of around 10.3%. Moody's considers this over-collateralisation
to be "committed".
Moody's has assigned a Timely Payment Indicator (TPI) of "Probable" to
the covered bonds.
The ratings assigned by Moody's address the expected loss posed to investors.
Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
The Aaa rating assigned to the existing covered bonds is expected to be
assigned to all subsequent covered bonds issued by the issuer under this
programme and any future rating actions are expected to affect all such
covered bonds. Should there be any exceptions to this, Moody's
will in each case publish details in a separate press release.
The principal methodology used in rating Abbey National Treasury Services
pls was Moody's Rating Approach to Covered Bonds, published in March
2010. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found on Moody's website.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
expected loss analysis and TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered
Bond Model (COBOL) which determines expected loss as a function of the
issuer's probability of default, measured by its rating of
Aa3, and the stressed losses on the cover pool assets following
issuer default.
The Cover Pool Losses for this programme are 18.5%.
This is an estimate of the losses Moody's currently models in the
event of issuer default. Cover Pool Losses can be split between
Market Risk of 13.5% and Collateral Risk of 5%.
Market Risk measures losses as a result of refinancing risk and risks
related to interest rate and currency mismatches (these losses may also
include certain legal risks). Collateral Risk measures losses resulting
directly from the credit quality of the assets in the cover pool.
Collateral Risk is derived from the Collateral Score which for this programme
is currently 7.5%.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator"
(TPI) which indicates the likelihood that timely payment will be made
to covered bondholders following issuer default. The effect of
the TPI framework is to limit the covered bond rating to a certain number
of notches above the issuer's rating.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the credit
strength of the issuer.
The number of notches by which the issuer's rating may be downgraded
before the covered bonds are downgraded under the TPI framework is measured
by the TPI Leeway. Based on the current TPI of "Probable"
the TPI Leeway for this programme is three notches, meaning the
issuer rating would need to be downgraded to Baa1 before the covered bonds
are downgraded, all other things being equal.
A multiple notch downgrade of the covered bonds might occur in certain
limited circumstances. Some examples might be (a) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and
the TPI; (b) a multiple notch downgrade of the issuer; or (c)
a material reduction of the value of the cover pool.
For further details on Cover Pool Losses, Collateral Risk,
Market Risk, Collateral Score and TPI Leeway across all covered
bond programmes rated by Moody's please refer to "Moody's
EMEA Covered Bonds Monitoring Overview", published quarterly.
All figures given above are based on most recent data reported to Moody's
and are subject to change over time.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service's information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
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 Investors Service adopts all necessary measures so that the information
it uses in assigning a credit rating is of sufficient quality and from
reliable sources; however, Moody's Investors Service does not
and cannot in every instance independently verify, audit 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
Jane Soldera
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Madrid
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
Moody's Investors Service Espana, S.A.
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
Moody's assigns definitive rating to covered bonds issued by Abbey National Treasury Services plc
