Approximately EUR4.5 billion of debt securities affected
London, 12 March 2012 -- Moody's Investors Service has today downgraded all the ratings of Irish
residential mortgage-backed securities (RMBS) notes issued by CELTIC
RESIDENTIAL IRISH MORTGAGE SECURITISATION NOs 9 and 10 PLC (Celtic 9 and
10) and downgraded the ratings of 5 RMBS notes issued by CELTIC RESIDENTIAL
IRISH MORTGAGE SECURITISATION NO 11 (Celtic 11) due to weak, deteriorating
performance. Also Moody's has today confirmed the ratings
of Classes A2a and A2b in Celtic 11. This rating action concludes
the review for downgrade initiated by Moody's on 7 December 2011.
The affected ratings are listed at the end of this press release.
RATINGS RATIONALE
Today's rating action reflects (i) the transactions' ongoing rapid
deterioration in performance; (ii) Moody's negative outlook for the
Irish RMBS sector; (iii) the credit quality of key parties to the
transaction; and (iv) structural features in place, such as
the amount of available credit enhancement.
KEY COLLATERAL ASSUMPTIONS REVISED
Celtic 9, 10 and 11 are performing worse than Moody's expectations
as of the latest review in July 2011. As of January 2012,
loans 90+ days in arrears have increased to 15.0% of
the current balance in Celtic 9, 15.2% in Celtic 10
and 7.6% in Celtic 11, which constitutes an approximate
20%-40% increase compared with June 2011 levels.
Cumulative losses realised since closing remain negligible at 0.02%
or less of the original pool balance in each deal. Moody's notes
that loss realisation is slow for Irish RMBS given the lengthy enforcement
procedures in Ireland and moratorium imposed. As a result,
Moody's considers loans with 360+ day delinquencies as a proxy for
defaults. As of February 2012, the 360+ day delinquencies
in the transactions had increased by 30%-45% compared
with June 2011, reaching 5.7% of the outstanding pool
balance in Celtic 9, 5.3% in Celtic 10 and 2.2%
in Celtic 11.
Moody's expects that rising unemployment and falling incomes, which
stem from the austerity measures in Ireland, will continue to hurt
borrowers' ability to fulfil their financial obligations.
In addition to high arrears, loss severity will be high as a result
of housing oversupply, a lack of refinancing and a further decline
in house prices, which Moody's expects will be equal to an
approximate 60% decline from peak--to-trough in the
base case scenario. As a result, Moody's increased
its portfolio expected loss assumptions in December 2011 to 5.5%
of the current pool balance for Celtic 11, 7% for Celtic
9 and 8% for Celtic 10, which corresponds to 3.6%
of the original pool balance for Celtic 9 and 11, and to 4.8%
of the original balance for Celtic 10.
During the review, Moody's re-assessed updated loan-by-loan
information and increased its MILAN CE assumptions to 22% in Celtic
11 and 27% in both Celtic 9 and 10.
Moody's confirmed the A1 ratings on Celtic 11's class A2a
and A2b notes on the back of their very short remaining life, available
credit enhancement and the credit quality of Ulster Bank Ireland Limited
(Baa1 on review for possible downgrade/P-2), servicer and
cash manager in the transaction. Given recently observed redemption
rates, Moody's expects that these classes will be fully redeemed
within the next two to three quarters.
FACTORS AND SENSITIVITY ANALYSIS
Moody's expected loss assumptions remain subject to uncertainties
with regard to general economic activity, interest rates and house
prices. Lower-than-assumed realised recovery rates
or higher-than-assumed default rates would negatively affect
these transactions' ratings.
The new Irish personal insolvency legislation proposed in January would
have a negative impact on the notes' ratings if it leads to a write
down of the mortgage debt supporting the notes (see Moody's special
comment "Proposed Irish Legislation Opens Door To Widespread Debt
Forgiveness" published on 8 February 2012).
As the euro area crisis continues, the notes' ratings remain
exposed to the uncertainties of credit conditions in the general economy.
The euro area sovereigns' deteriorating creditworthiness,
as well as the weakening credit profile of the global banking sector could
negatively impact the notes' ratings. For more information
please refer to the rating implementation guidance "How Sovereign
Credit Quality May Affect Other Ratings" published on 13 February
2012 and the special comment published on 19 January 2012 "Why Global
Bank Ratings Are Likely to Decline in 2012".
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was "Moody's Approach
to Rating RMBS in Europe, Middle East, and Africa",
published in October 2009. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
In reviewing these transactions, Moody's used ABSROM to model the
cash flows and determine the loss for each rated tranche. The cash
flow model evaluates all default scenarios, which 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 for each tranche
is the sum product of the probability of each default scenario and 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.
LIST OF AFFECTED RATINGS
Issuer: Celtic Residential Irish Mortgage Securitisation No.9
Plc
....EUR1067.5M A2 Notes, Downgraded
to Ba2 (sf); previously on Dec 7, 2011 Baa1 (sf) Placed Under
Review for Possible Downgrade
....EUR70M B Notes, Downgraded to Ca
(sf); previously on Dec 7, 2011 Caa2 (sf) Placed Under Review
for Possible Downgrade
Issuer: CELTIC RESIDENTIAL IRISH MORTGAGE SECURISATION NO.
10 PLC
....EUR1253M A2 Notes, Downgraded to
Ba3 (sf); previously on Dec 7, 2011 Baa2 (sf) Placed Under
Review for Possible Downgrade
....EUR89.5M B Notes, Downgraded
to Ca (sf); previously on Dec 7, 2011 Caa2 (sf) Placed Under
Review for Possible Downgrade
Issuer: CELTIC RESIDENTIAL IRISH MORTGAGE SECURISATION NO.
11 PLC
....EUR385M A2a Notes, Confirmed at
A1 (sf); previously on Dec 7, 2011 A1 (sf) Placed Under Review
for Possible Downgrade
....US$328M A2b Notes, Confirmed
at A1 (sf); previously on Dec 7, 2011 A1 (sf) Placed Under
Review for Possible Downgrade
....EUR1388.8M A3a Notes, Downgraded
to Ba1 (sf); previously on Dec 7, 2011 A3 (sf) Placed Under
Review for Possible Downgrade
....GBP586M A3c Notes, Downgraded to
Ba1 (sf); previously on Dec 7, 2011 A3 (sf) Placed Under Review
for Possible Downgrade
....EUR77M Ba Notes, Downgraded to Caa1
(sf); previously on Dec 7, 2011 Ba3 (sf) Placed Under Review
for Possible Downgrade
....EUR147.4M Ca Notes, Downgraded
to Ca (sf); previously on Dec 7, 2011 Caa2 (sf) Placed Under
Review for Possible Downgrade
....GBP17.5M Cc Notes, Downgraded
to Ca (sf); previously on Dec 7, 2011 Caa2 (sf) Placed Under
Review for Possible Downgrade
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 ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings 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 related to the monitoring of these transactions in the past
six months.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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 entities or their 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.
Maria Divid
Associate 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
Annick Poulain
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 downgrades Irish RMBS notes issued by Celtic 9, 10 and 11
