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Related Issuers
Rating Action:

Moody's assigns definitive ratings to Notes issued by Mortimer BTL 2019-1 PLC

21 Jun 2019

GBP 264.4million RMBS Notes rated, relating to a portfolio of the UK buy-to-let mortgage loans

London, 21 June 2019 -- Moody's Investors Service ("Moody's") has assigned definitive ratings to Notes issued by Mortimer BTL 2019-1 PLC:

....GBP 215.120M Class A Mortgage Backed Floating Rate Notes due June 2051, Definitive Rating Assigned Aaa (sf)

....GBP 14.255M Class B Mortgage Backed Floating Rate Notes due June 2051, Definitive Rating Assigned Aa1 (sf)

....GBP 12.959M Class C Mortgage Backed Floating Rate Notes due June 2051, Definitive Rating Assigned A1 (sf)

....GBP 9.071M Class D Mortgage Backed Floating Rate Notes due June 2051, Definitive Rating Assigned Baa2 (sf)

....GBP 7.776M Class E Mortgage Backed Notes due June 2051, Definitive Rating Assigned Caa1 (sf)

....GBP 5.184M Class X Floating Rate Notes due June 2051, Definitive Rating Assigned B2 (sf)

Moody's has not assigned a rating to the GBP 5.184M Class Z Notes due June 2051.

RATINGS RATIONALE

The Notes are backed by a pool of prime UK buy-to-let ("BTL") mortgage loans originated by LendInvest BTL Limited ("LendInvest", NR). This represents the first rated RMBS issuance from LendInvest.

The portfolio of assets amount to approximately GBP 259.2million as of 10 May 2019 pool cut-off date. The Reserve Fund will be funded to 2.00% of the balance of Class A to E Notes at closing and the total credit enhancement (without giving benefit to excess spread) for the Class A Notes will be 19.00%.

The ratings are primarily based on the credit quality of the portfolio, the structural features of the transaction and its legal integrity.

According to Moody's, the transaction benefits from various credit strengths such as a static structure and a relatively low weighted-average loan-to-value ("LTV"). However, Moody's notes that the transaction features some credit weaknesses such as an unrated originator with a short history also acting as servicer and the absence of a balance guaranteed basis swap. Various mitigants have been included in the transaction structure such as an experienced contractual servicer, Pepper (UK) Limited (NR), and a back-up servicer facilitator which is obliged to appoint a replacement servicer if certain triggers are breached.

Moody's determined the portfolio lifetime expected loss of 2.50% and 16.00% MILAN Credit Enhancement ("MILAN CE") related to borrower receivables. The expected loss captures our expectations of performance considering the current economic outlook, while the MILAN CE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and MILAN CE are parameters used by Moody's to calibrate its lognormal portfolio loss distribution curve and to associate a probability with each potential future loss scenario in the ABSROM cash flow model to rate RMBS.

Portfolio expected loss of 2.50%: This is higher than the UK Prime RMBS sector average and is based on Moody's assessment of the lifetime loss expectation for the pool taking into account the originator's limited historical performance data for buy-to-let loans and benchmarking with other UK BTL prime RMBS transactions. It also takes into account UK BTL RMBS outlook and the UK economic environment.

MILAN CE of 16.00%: This is higher than the UK Prime RMBS sector average and follows Moody's assessment of the loan-by-loan information taking into account following key drivers: (i) the fact that the historical performance data is limited; (ii) the weighted average CLTV of 71.70%; (iii) the very low seasoning of 0.5 years; (iv) the proportion of interest-only loans is 100.0%; and (v) the proportion of buy-to-let loans 100.0%;

All the mortgages in the pool carry a fixed rate. The transaction benefits from a swap agreement to mitigate the fixed-floating mismatch between the initial fixed rate paid by the mortgages and the floating rate paid under the Notes. Over time, all the loans in the portfolio will reset from fixed rate to a floating rate linked to three months LIBOR. As is the case in many UK RMBS transactions, this basis risk mismatch between the floating rate on the underlying loans and the floating rate on the notes will be unhedged. Moody's has applied a stress to account for the basis risk, in line with the stresses applied to the various types of unhedged basis risk seen in UK RMBS.

Principal Methodology

The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in March 2019. Please see the Rating Methodologies 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:

Factors that may cause an upgrade of the ratings of the Notes include significantly better than expected performance of the pool together with an increase in credit enhancement of the Notes.

Factors that would lead to a downgrade of the ratings include: (i) increased counterparty risk leading to potential operational risk of servicing or cash management interruptions; and (ii) economic conditions being worse than forecast resulting in higher arrears and losses.

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.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

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.

Gabriele Gramazio
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
Client Service: 44 20 7772 5454

Barbara Rismondo
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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