GBP[] million RMBS Notes provisionally rated, relating to a portfolio of UK prime residential mortgage loans
NOTE: On August 10, 2021, the press release was corrected as follows: In the ninth paragraph of the press release, the back-up servicer facilitator name was changed to CSC CORPORATE SERVICES(UK)LTD. Revised release follows.
London, 09 August 2021 -- Moody's Investors Service ("Moody's") has assigned provisional ratings
to Notes to be issued by Blitzen Securities No.1 PLC:
....GBP[]M Class A Mortgage Backed Floating
Rate Notes due December 2062, Assigned (P)Aaa (sf)
....GBP[]M Class B Mortgage Backed Floating
Rate Notes due December 2062, Assigned (P)Aa1 (sf)
....GBP[]M Class C Mortgage Backed Floating
Rate Notes due December 2062, Assigned (P)Aa3 (sf)
....GBP[]M Class D Mortgage Backed Floating
Rate Notes due December 2062, Assigned (P)A3 (sf)
....GBP[]M Class E Mortgage Backed Floating
Rate Notes due December 2062, Assigned (P)Baa2 (sf)
....GBP[]M Class F Mortgage Backed Floating
Rate Notes due December 2062, Assigned (P)Ba2 (sf)
....GBP[]M Class X Floating Rate Notes
due December 2062, Assigned (P)B3 (sf)
RATINGS RATIONALE
The Notes are backed by a pool of UK prime residential mortgages granted
to first-time buyers with original LTVs between 85% and
95% originated by Santander UK plc ("Santander"(A1/P-1/Aa3(cr)/P-1(cr)).
An investor acquired the pool through a bidding process from Santander
and will sell it to the issuer. Santander will retain 5%
of a randomly selected portion of the portfolio.
The portfolio of assets amounts to approximately GBP [605] million
as of the 30 June 2021 pool cutoff date. At closing the total credit
enhancement for the Class A Notes is [16.5]% provided
through subordination and an amortising split reserve fund which will
be funded to [1.5]% of the mortgage portfolio balance
at closing.
The ratings are based on the credit quality of the portfolio, the
structural features of the transaction and its legal integrity.
Moody's determined the portfolio lifetime expected loss of [1.3]%
and Aaa MILAN credit enhancement ("MILAN CE") of [10.0]%
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 losses 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 losses of [1.3]%: This is
higher than the UK Prime RMBS sector and is based on Moody's assessment
of the lifetime loss expectation for the pool taking into account:
(i) the higher WA current LTV level of [87.7]% in the
portfolio compared to other UK prime RMBS transactions; (ii) the
fact that 100% of the mortgages have been granted to first-time
buyers; (iii) the collateral performance of high LTV loans originated
by Santander, as provided by the originator; (iv) the current
macroeconomic environment in the UK and the impact of future interest
rate rises on the performance of the mortgage loans; and (v) benchmarking
with other UK prime transactions.
MILAN CE of [10.0]%: This is higher than the
UK Prime RMBS sector, and follows Moody's assessment of the loan-by-loan
information taking into account the following key drivers: (i) the
WA current LTV for the pool of [87.7]%; (ii) the
fact that 100% of the mortgages have been issued to first time
buyers; (iii) the static nature of the pool; (iv) the share
of self-employed borrowers of [16.8]%;
(v) the share of foreign National of [14.6]%;
and (vi) benchmarking with similar UK Prime RMBS transactions.
The transaction benefits from a liquidity reserve fund and a general reserve
fund. The liquidity reserve fund is fully funded at closing and
is equal to 1.5% of the Class A and B Notes original balance.
The liquidity reserve fund is amortising, but will stop amortising
if the cumulative default rate on the portfolio is greater than [5]%
of the aggregate balance on the closing date or when the transaction reaches
the first optional redemption date. Once the Class B Notes have
fully redeemed, the liquidity reserve fund will be equal to zero.
The liquidity reserve fund will cover senior fees, interest on the
Class A Notes at all time, and interest on the Class B Notes provided
the debit balance on the Class B PDL does not exceed 25% of the
Class B outstanding balance, or without any condition if Class B
is the most senior class outstanding.
The general reserve fund is funded to 1.5% of Class C to
F Notes with a required amount of 1.5% of Class A to F Notes
outstanding balance minus the liquidity reserve fund required amount.
It is available to cover interest on the Class A Notes at all time,
interest on the Class B Notes provided the debit balance on the Class
B PDL does not exceed 25%, and interest on the Class C to
F Notes provided the debit balance on their respective class PDL does
not exceed 0%. For Class B to F, once they become
the most senior class outstanding, the General Reserve Fund will
be available to cover interest without any condition.
Operational Risk Analysis: Santander is the servicer in the transaction.
To help ensure continuity of payments in stressed situations, the
deal structure provides for: (i) a back-up servicer facilitator
(CSC CORPORATE SERVICES(UK)LTD (NR)); (ii) liquidity for the Class
A and B Notes under certain conditions; (iii) estimation language
whereby the cash flows will be estimated from the three most recent servicer
reports should the servicer report not be available; and (iv) principal
to pay interest as a source of liquidity for the Classes A to F which
is available at all time for Class A Notes, either when Class B
PDL does not exceed 25%, or when Class B Notes is the most
senior class for Class B Notes, and when the relevant class of Notes
is the most senior class outstanding for Class C to F Notes.
Interest Rate Risk Analysis: 100% of the loans in the pool
are fixed rate loans reverting to Bank of England base rate (BBR).
The Notes are floating rate securities with reference to daily SONIA.
To mitigate the fixed-floating mismatch between fixed-rate
assets and floating-rate liabilities, there will be a fixed-floating
interest rate swap with a scheduled notional provided by Banco Santander
S.A. (A3(cr)/P-2(cr)).
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in December 2020 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1248130.
Alternatively, 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:
Significantly different actual losses compared with our expectations at
close due to either a change in economic conditions from our central scenario
forecast or idiosyncratic performance factors could lead to rating actions.
Deleveraging of the capital structure or conversely a deterioration in
the Notes' available credit enhancement could result in an upgrade
or a downgrade of the ratings, respectively.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
Duy-Anh Bui
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
Armin Krapf
VP - Senior Credit Officer
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
