Paris, February 06, 2020 -- Moody's Investors Service ("Moody's") has assigned
definitive credit ratings to the following Notes issued by Silverstone
Master Issuer PLC Series 2020-1:
....GBP 1000M Series 2020-1 Class 1A
Notes due January 2070, Definitive Rating Assigned Aaa (sf)
....GBP 650M Series 2020-1 Class 2AR
Notes due January 2070, Definitive Rating Assigned Aaa (sf)
....GBP 650M Series 2020-1 Class 3AR
Notes due January 2070, Definitive Rating Assigned Aaa (sf)
....GBP 650M Series 2020-1 Class 4AR
Notes due January 2070, Definitive Rating Assigned Aaa (sf)
Moody's assigned provisional ratings on 27th January 2020.
Moody's also affirms the existing ratings of Notes issued by Silverstone
Master Issuer PLC.
RATINGS RATIONALE
The Notes are backed by a pool of prime UK residential mortgages originated
by Nationwide Building Society (Aa3/P-1/Aa2(cr)/P-1(cr)).
This represents the 11th issue out of the Silverstone Master Trust structure.
As of the 31st January 2020 the trust property for this transaction consists
of approximately GBP 16 billion of loans. The reserve fund is funded
to 2.33% of the total Notes outstanding at closing and the
total Credit Enhancement for the Series 2020-1 Class A Notes is
11.31%.
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 0.8% and MILAN Credit Enhancement of 5.5%.
Portfolio expected loss of 0.8%: this is lower than
the UK Prime sector average of 1.0% and is based on Moody's
assessment of the lifetime loss expectation for the pool taking into account:
(i) the collateral performance of Nationwide Building Society originated
loans to date, as provided by the originator and observed in the
Silverstone 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; (iii) benchmarking with comparable
transactions in the UK market; and (iv) the potential drift in the
pool's asset quality since loans can be substituted.
MILAN Credit Enhancement of 5.5%: this is lower than
the UK Prime sector average of 9.0% and follows Moody's
assessment of the loan-by-loan information taking into account
the following key drivers: (i) the historic collateral performance
as described above; (ii) the weighted average current loan-to-value
of 60.6% 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 23.2% in 2018;
(iv) compliance with Moody's Portfolio Variation Test when adding new
loans to the pool; and (v) potential drift in asset quality through
new loans being added as described above.
Note coupons linked to SONIA: all the Classes of Notes in the 2020-1
Series use Sterling Overnight Index Average ("SONIA") as a reference rate
for the Note coupons rather than sterling LIBOR, which was traditionally
referenced in UK RMBS. LIBOR will only continue to be the reference
rate on the outstanding USD Notes from earlier series. On each
interest payment date, the coupon on the SONIA Notes is calculated
by compounding the daily SONIA rate over the calculation period.
Interest Rate Risk Analysis: At closing, the interest rates
on the loans are comprised of 63.9% fixed rate reverting
to Nationwide Building Society's standard mortgage rate (SMR),
27.1% Base Mortgage Rate (BMR), 2.6%
SMR, and 6.4% Tracker loans. To mitigate the
interest rate mismatch between interest on the loans - other than
the Tracker loans - and the coupons on the Notes linked to SONIA
and LIBOR, there is a series of balance guaranteed swaps provided
by Nationwide Building Society. The Tracker portion of the portfolio
is unhedged. The balance of the Tracker loans scaled down by the
funding share is carved out from the SONIA swaps notionals, while
the LIBOR Notes are fully covered by the swap notional as long as the
Tracker loan portion remains smaller than the balance of the SONIA linked
Notes. The difference between the Tracker rate on the assets and
the SONIA linked liabilities was taken into account in the stressed margin
vector used in the cash flow modelling.
Principal Methodology
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in July 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 a downgrade of the ratings:
Factors that would lead to a downgrade of the ratings include economic
conditions being worse than forecast resulting in worse-than-expected
performance of the underlying collateral, deterioration in the credit
quality of the counterparties and unforeseen legal, or regulatory
changes.
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.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1212594.
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, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
The relevant office for each credit rating is identified in "Debt/deal
box" on the Ratings tab in the Debt/Deal List section of each issuer/entity
page of the website.
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.
Vincent Verdier
Asst Vice President - Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Olga Gekht
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Lisa Macedo
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
