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Rating Action:

Moody's assigns definitive ratings to Holmes Master Issuer plc Series 2012-4

31 Aug 2012

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
No Related Data.
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