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Rating Action:

Moody's downgrades eleven notes in four RMBS transactions exposed to Deutsche Bank AG and Deutsche Postbank AG

05 Aug 2014

Two notes issued by Holmes Master Issuer remain on review for downgrade

London, 05 August 2014 -- Moody's Investors Service has downgraded the ratings of 11 notes in four residential mortgage-backed securities (RMBS) that have increased counterparty risk arising from their exposure to Deutsche Bank AG, Deutsche Bank, AG London Branch (collectively referred to further in this press release as Deutsche Bank) or Deutsche Postbank AG.

The long-term ratings of Deutsche Bank and Deutsche Postbank AG were downgraded to A3 from A2 on 29 July 2014 (https://www.moodys.com/research/PR_304746 and https://www.moodys.com/research/PR_304911).

The ratings of Holmes Master Issuer Series 2012-1 Class A2 and Holmes Master Issuer Series 2012-4 Class A remain on review for downgrade. Moody's has received communication in relation to the intention to restructure the affected currency swaps in the coming days and the notes remain on review for downgrade pending this restructure.

See towards the end of the ratings rationale section of this press release for a detailed list of affected ratings.

RATINGS RATIONALE

-- HOLLAND MORTGAGE BACKED SERIES (HERMES) XV B.V.

The rating of the Class B notes in HOLLAND MORTGAGE BACKED SERIES (HERMES) XV B.V. was placed on review for downgrade following the placement on review of the long-term rating of Deutsche Bank in May 2014 (https://www.moodys.com/research/PR_299522). Following the downgrade of Deutsche Bank, the probability of the transaction becoming unhedged has increased sufficiently so as to negatively affect the rating of these notes.

-- PB Domicile 2006-1

The issuance proceeds that ultimately back the principal repayment of Classes D and E of PB Domicile 2006-1 are invested in senior unsecured debt of Deutsche Postbank AG. This creates linkage between the ratings of the Class D notes and those of Deutsche Postbank AG, such that the rating of Class D is capped at the rating level of Deutsche Postbank AG. Consequently, Deutsche Postbank's downgrade resulted in the downgrade of the Class D notes to A3 (sf) from A2 (sf).

-- Aire Valley and Granite

The ratings of Series 2A1 Notes in Aire Valley Mortgages 2006-1 plc (Aire Valley); Class B2 and M2 in Granite Master Issuer plc Series 2006-2; and Class 2A1, 2A2, 3A1, 1B1, 2B1 and 3B1 in Granite Master Issuer plc Series 2007-2 (collectively Granite) were placed on review for possible downgrade following the placement on review of the long-term rating of Deutsche Bank in May 2014 (https://www.moodys.com/research/PR_299522). Following the downgrade of Deutsche Bank, the probability of the transaction becoming unhedged has increased.

Furthermore, given the uncertainty of transaction documentation as to whether deal credit enhancement is available to cover swap losses, Moody's has assessed these transactions using both the scenarios where credit enhancement is available, and where swap losses are allocated directly to the affected note. In the absence of credit enhancement, should the transactions become unhedged there is potential for high loss severities on these tranches.

Following the downgrade of Deutsche Bank, the increased probability of the transaction becoming unhedged, combined with the potential for high loss severities, has resulted in the downgrade of the affected notes.

The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in March 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the ratings:

Factors or circumstances that could lead to a downgrade of the ratings affected by today's action would be the worse-than-expected performance of the underlying collateral and deterioration in the credit quality of the counterparties.

Factors or circumstances that could lead to an upgrade of the ratings affected by today's action would be a decline in counterparty risk, and, except for PB Domicile 2006-1, better than expected performance of the underlying collateral and credit enhancement increase.

LIST OF AFFECTED RATINGS:

Issuer: Aire Valley Mortgages 2006-1 plc

....EUR 854M Series 2 A1 Notes, Downgraded to Aa3 (sf); previously on May 16, 2014 Aa2 (sf) Placed Under Review for Possible Downgrade

Issuer: Granite Master Issuer plc Series 2006-2

....US 36M Class B2 Notes, Downgraded to Aa3 (sf); previously on May 16, 2014 Aa2 (sf) Placed Under Review for Possible Downgrade

....US 25M Class M2 Notes, Downgraded to Aa3 (sf); previously on May 16, 2014 Aa2 (sf) Placed Under Review for Possible Downgrade

Issuer: Granite Master Issuer plc Series 2007-2

....US 66.5M Class 1B1 Notes, Downgraded to Aa1 (sf); previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

....US 1025M Class 2A1 Notes, Downgraded to Aa1 (sf); previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

....CAD 500M Class 2A2 Notes, Downgraded to Aa1 (sf); previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

....US 53.5M Class 2B1 Notes, Downgraded to Aa1 (sf); previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

....US 1100M Class 3A1 Notes, Downgraded to Aa1 (sf); previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

....USD 35M Class 3B1 Notes, Downgraded to Aa1 (sf); previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) XV B.V.

....EUR 9.75M Class B Notes, Downgraded to Aa2 (sf); previously on May 16, 2014 Aa1 (sf) Placed Under Review for Possible Downgrade

Issuer: PB Domicile 2006-1

....EUR 48.9M Class D Notes, Downgraded to A3 (sf); previously on Jul 2, 2012 Downgraded to A2 (sf)

Issuer: Holmes Master Issuer Series 2012-1

....US$500M Class A2 Notes, Aaa (sf) Remains On Review for Possible Downgrade; previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

Issuer: Holmes Master Issuer Series 2012-4

....EUR650M Class A Notes, Aaa (sf) Remains On Review for Possible Downgrade; previously on May 16, 2014 Aaa (sf) Placed Under Review for Possible Downgrade

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.

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.

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.

As the section on loss and cash flow analysis describes, 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 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 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 rating action, and whose ratings may change as a result of this 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 person who approved Aire Valley Mortgages 2006-1 plc, Granite Master Issuer plc Series 2006-2, and Granite Master Issuer plc Series 2007-2 and credit ratings is Annabel Schaafsma, Associate Managing Director, Structured Finance Group, Journalists Tel: 44 207772 5456, Subscribers Tel: 44 207772 5454.

The person who approved PB Domicile 2006-1 and HOLLAND MORTGAGE BACKED SERIES (HERMES) XV B.V. credit ratings is Anthony Parry, Vice President-Sr Credit Officer, Structured Finance Group, Journalists Tel: 44 207772 5456, Subscribers Tel: 44 207772 5454.

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 analyst and the Moody's legal entity that has issued the ratings.

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.

Maria Divid
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

Annabel Schaafsma
Associate Managing Director
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 eleven notes in four RMBS transactions exposed to Deutsche Bank AG and Deutsche Postbank AG
No Related Data.
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