London, 31 August 2012 -- Moody's Investors Service has assigned definitive credit ratings to the
following Notes issued by Holmes Master Issuer plc Series 2012-4:
.EUR650M A Floating-Rate Notes due 2054, Assigned
Aaa (sf)
Moody's has not rated GBP180M Class Z mortgage backed notes due 2054.
RATINGS RATIONALE
The notes are backed by a pool of prime UK residential mortgages originated
by Santander UK plc ("Santander", A2 / P-1 both
on watch for Possible Downgrade). This represents the 24th issue
out of the Holmes Master Trust structure. At closing the trust
property for this transaction consists of approximately GBP 14.0
billion of loans. The reserve fund is funded to 3.6%
of the total notes outstanding at closing and the total credit enhancement
for the Class A notes is 20.4%.
The ratings are primarily based on the credit quality of the portfolio,
its diversity, the structural features of the transaction and its
legal integrity. From the assessment of the credit quality of the
underlying mortgage loan pool, Moody's determined the portfolio
expected loss of 1% and MILAN Credit Enhancement (CE) of 9%.
Portfolio expected loss of 1%: This is in line with the UK
Prime sector average and is based on Moody's assessment of the lifetime
loss expectation for the pool taking into account (i) the collateral performance
of Santander originated loans to date, as provided by the originator
and observed in the Holmes Master Trust; (ii) the current macroeconomic
environment in the UK and the potential impact of future interest rate
rises on the performance of the mortgage loans; and (iii) the potential
drift in asset quality since the pool can be substituted continuously
subject to certain triggers.
MILAN CE of 9%: This is in line with the UK Prime sector
average and follows Moody's assessment of the loan-by-loan
information taking into account the following key drivers (i) the historic
collateral performance of as described above; (ii) the weighted average
current loan-to-value of 65.0% which is slightly
lower than the average seen in the sector; (iii) the pool contains
many years of origination with the maximum vintage concentration of 23.6%
in 2007; (iv) potential drift in asset quality as described above.
The rating on the notes addresses 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.
As the Euro area crisis continues, the rating of the structured
finance notes remain exposed to the uncertainties of credit conditions
in the general economy. The deteriorating creditworthiness of euro
area sovereigns as well as the weakening credit profile of the global
banking sector could negatively impact the ratings of the notes.
Furthermore, as discussed in Moody's special report "Rating Euro
Area Governments Through Extraordinary Times -- An Updated
Summary," published in October 2011, Moody's is reintroducing
individual country ceilings for some or all euro area members, which
could affect further the maximum structured finance rating achievable
in those countries.
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 it is a standard UK prime RMBS Master Trust transaction for
which we have over ten years of historical performance data. 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 1.0% of current balance to 3.0%
of current balance, and the MILAN Credit Enhancement was increased
from 9.0% to 14.4%, the model output
indicates that the 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.
In addition to the new issuance the Mortgages Trustee GIC account rating
trigger has been lowered from P-1 to P-2. On loss
of this rating trigger the Cash manager is required to open a new Mortgages
Trustee GIC account with a GIC account provider rated P-1.
An additional rating trigger provision has also been introduced,
in the event the Mortgages Trustee GIC account provider is downgraded
by Moodys below P-1 an account must be opened with a stand-by
mortgages trustee account bank with a rating of P-1.
Moody's has assessed the probability and impact of a default of the Mortgage
Trustee GIC account bank on the ability of the Holmes Issuer's to meet
their obligations under the transaction, including the impact of
the loss of any cash held by the Bank should it default and any loss that
may be incurred after that time due to any delay in redirecting payments
to a new account.
The principal methodology used in this rating was Moody's Approach to
Rating RMBS in Europe, Middle East and Africa published in June
2012. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Other Factors used in this rating are described in Global Structured Finance
Operational Risk Guidelines: Moody's Approach to Analyzing Performance
Disruption Risk published in June 2011.
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.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's did not receive or take into account a third-party assessment
on the due diligence performed regarding the underlying assets or financial
instruments in this transaction.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF296085.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities rated
by MIS's EU credit rating agencies" on the ratings disclosure page on
our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's 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 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.
John Paul Truijens
Asst Vice President - 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
Neal?Shah
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns definitive ratings to Holmes Master Issuer plc Series 2012-4
