London, 31 March 2011 -- Moody's Investors Service has assigned definitive credit ratings to the
following classes of notes issued by Headingley RMBS 2011-1 plc:
Aaa (sf) to the A$275,000,000 Class A1a asset backed
floating rate Notes due 2051
Aaa (sf) to the €500,000,000 Class A1b asset backed floating
rate Notes due 2051
Aaa (sf) to the GBP225,200,000 Class A2 asset backed floating
rate Notes due 2051
Aaa (sf) to the GBP225,300,000 Class A3 asset backed floating
rate Notes due 2051
Aa1 (sf) to the GBP112,900,000 Class B asset backed fixed
rate Notes due 2051
Aa3 (sf) to the GBP75,300,000 Class C asset backed fixed
rate Notes due 2051
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 any legal considerations as assessed in Moody's
cash flow analysis. The expected portfolio loss of 1.2%
of original balance of the portfolio at closing and the MILAN Aaa required
Credit Enhancement of 11.0% served as input parameters for
the cash flow model, which is based on a probabilistic lognormal
distribution as described in the report "Cash Flow Analysis in EMEA RMBS:
Testing Features with the MARCO Model(Moody's Analyser of Residential
Cash Flows)", published in January 2006. The key drivers
for the MILAN Aaa Credit Enhancement number, which is in line with
other prime UK prime RMBS transactions, are the weighted average
loan-to-value (LTV) of 72.1% and the average
seasoning of 1.7 years.
The key drivers for the portfolio expected loss are (i) the performance
of the seller's precedent transactions, (ii) benchmarking with comparable
transactions in the UK market and (iii) the current economic conditions
in the UK. Given the historical performance of the UK RMBS market
and the originator's precedent transactions, Moody's believes the
assumed expected loss is appropriate for this transaction.
The ratings address the expected loss posed to investors by the legal
final maturity. 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 Bank of Scotland plc ("BoS", Aa3/P-1) under
the "Halifax" brand. The portfolio will be serviced
by BoS. At closing the mortgage pool balance will consist of approximately
GBP 1.4 billion of loans. The non-amortizing reserve
fund will be funded to 5.5% of the pool balance and a liquidity
reserve fund will be funded up to 3% if BoS is downgraded below
A3. An unusual feature in this transaction is the inclusion of
seller share in the standalone transaction.
The V Score for this transaction is Low/Medium, which is in line
with the score assigned for the UK prime RMBS sector mainly due to the
fact that we have over 20 years of historical performance data from the
seller. 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: If the portfolio expected loss
was increased from 1.2% of current balance to 3.6%
of current balance and the MILAN Aaa Credit Enhancement was increased
from 11.0% to 17.6%, the model output
indicates that the Class A1a, A1b, A2 and A3 notes would still
achieve Aaa assuming that all other factors remained equal. 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 Features with the MARCO Model (Moody's Analyser
of Residential Cash Flows) 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
Ming Zhou
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 assigns definitive ratings to 6 classes of UK RMBS notes issued by Headingley RMBS 2011-1 plc
