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Rating Action:

Moody's downgrades 3 classes of notes issued by Celtic Residential Irish Mortgage Securitisation No. 12 Limited

12 Aug 2010

Approximately EUR 1.1 billion of debt securities affected

London, 12 August 2010 -- Moody's Investors Service announced today that it has downgraded the ratings of the class A3, B and C notes issued by Celtic Residential Irish Mortgage Securitisation No. 12 Limited (Celtic 12). A detailed list of the rating actions is provided at the end of this press release.

Last rating action date for Celtic 12 was 23 July 2010, when the Class A3 and Class B were placed under review for possible downgrade given deterioration in credit trends, most specifically 90d+ arrears. The Class C notes in Celtic 12 were put on review for possible downgrade in July 2009.

Today's rating action concludes the review and takes into consideration the worse-than-expected performance of the collateral and the weakened macro-economic environment in Ireland, including the expected increase in unemployment rates projected for 2010 as well as further deterioration of the Irish housing market.

POOL COMPOSITION AND PORTFOLIO PERFORMANCE

Celtic 12 closed in June 2007. The transaction is backed by a portfolio of first-ranking mortgage loans originated by First Active, now Ulster Bank (A2/P1), and secured on residential properties located in Ireland, for an overall balance of EUR 1.95 billion at closing. The portfolio has a weighted average seasoning exceeding 60 months and a weighted average non-indexed loan-to-value (LTV) of currently 66%. Irish house prices have fallen by more than 35% below the peak reached in late 2006. As result, indexed LTV on the pool has significantly increased, with 45% of the portfolio currently in negative equity. The portfolio has an indexed weighted average LTV of currently 88.2%.

Celtic 12 is performing outside of Moody's expectations as of closing. The collateral performance has deteriorated rapidly over the past 12 months. The share of loans more than 90 days in arrears more than doubled since June 2009, from 3.61% of current pool balance in June 2009 to 8.28% as at June 2010. The 360d+ delinquent loans have risen from 1.04% of the outstanding balance as of July 2009 to 2.4% as of June 2010. Despite the rapid deterioration in total delinquencies, Celtic 12 has experienced only 2 cases of repossession to-date. The negligible level of repossessions to-date in the Irish mortgage market is associated to the lengthy foreclosure process in Ireland as well as to the moratorium on legal proceedings introduced by the Irish government in February 2009.

Today's rating action takes into consideration the weakening of the Irish economic conditions and in particular the effects that the anticipated tightening of fiscal policy, on the back of government austerity, is likely to have on the recovery in the Irish labour market and on the household finances. Moody's does not expect the arrears level in this transaction to stabilize before 2011.

REVISED LIFETIME LOSSES AND MILAN Aaa CE

Moody's has reassessed its lifetime loss expectation for Celtic 12 to account for the collateral performance to date as well as the current macroeconomic environment in Ireland. On the basis of the rapid deterioration in 360d+ arrears in the transaction, we have updated the portfolio expected loss assumption to 2.4% of original balance, up from 0.8% at closing.

As part of its analysis, Moody's has also assessed loan-by-loan information for the outstanding portfolio to determine the credit support consistent with target rating levels and the volatility of the distribution of future losses. For this review, "Moody's MILAN Methodology for Rating Irish RMBS" was used. As a result, Moody's has increased its MILAN Aaa credit enhancement (MILAN Aaa CE) assumptions from 8.5% to 16% for Celtic 12. The loss expectation and the Milan Aaa CE are the two key parameters used by Moody's to calibrate its loss distribution curve, which is one of the core inputs in the cash-flow model it uses to rate RMBS transactions. Current credit enhancement under Class A notes (including subordination and reserve fund) is 10.8%. Moody's expects the notes amortization to remain sequential for the remaining life of the deal, with class A2 to be repaid in priority to class A3. Therefore Moody's maintains Aaa (sf) rating for the Class A2.

DEAL STRUCTURE

Amortization of the notes: The senior notes and subordinated notes have been amortizing sequentially since closing. The notes amortization is to switch to sequential pay from June 2010 if class A credit enhancement provided by the B and C notes doubles the level at closing and certain conditions are met, such as: 1) the outstanding balance of the loans more than 90d+ in arrears remains below 2.7% of current pool balance, 2) there is no unpaid principal deficiency remaining after the revenue fund allocation, 3) and the reserve fund is at target level and 4) cumulative losses are less than 1% of outstanding pool balance. Moody's notes that the arrears trigger is currently in breach, with 90d+ arrears representing currently 8.28% of current pool balance, well over the 2.7% 90d+ arrears trigger level. Moody's expects that the notes will continue to amortize sequentially until final maturity of the transaction.

Reserve Fund: The reserve fund was funded at closing to EUR 19.5m. It is non-amortizing and subject to an arrears trigger. The reserve fund is required to build up through the application of excess spread until it reaches an amount equal to 1 % of the original balance of the notes plus 15% of the current outstanding balance of loans that are more than 12 months in arrears and 30% of the current outstanding balance of loans that are more than 24 months in arrears. The reserve fund has build up to currently EUR 26m, or 1.8% of current pool balance.

Hedging agreements: The transaction benefits from interest rate swaps provided by Royal Bank of Scotland (Aa3/P-1).

Moody's ratings address the expected loss posed to investors by the legal final maturity of the notes. Moody's ratings address only the credit risks associated with the transactions. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

The principal methodologies used in monitoring this transaction is "Moody's MILAN Methodology for Rating Irish RMBS" published in April 2009, and "Revising Default/Loss Assumptions Over the Life of an ABS/RMBS Transaction" published in December 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Please also refer to the "Irish Prime RMBS Indices - May 2010", which is available on www.moodys.com in the Industry / Sector Research sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's web site. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our web site, at www.moodys.com/SFQuickCheck.

LIST OF DETAILED RATING ACTIONS

Issuer: Celtic Residential Irish Mortgage Securitisation No.12 Ltd.

EUR1010.685M A3 Notes, Downgraded to Aa2 (sf); previously on Jul 23, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

EUR39M B Notes, Downgraded to Baa1 (sf); previously on Jul 23, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

EUR87.75M C Notes, Downgraded to B3 (sf); previously on Jul 22, 2009 Baa2 (sf) Placed Under Review for Possible Downgrade

London
Carole Bernard
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom

Moody's downgrades 3 classes of notes issued by Celtic Residential Irish Mortgage Securitisation No. 12 Limited
No Related Data.
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