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Rating Action:

Moody's downgrades ratings of Irish RMBS issued by Celtic 12 and Fastnet 2

14 May 2012

Approximately EUR2.6 billion of debt securities affected

London, 14 May 2012 -- Moody's Investors Service has today downgraded the ratings of Irish RMBS notes issued by CELTIC RESIDENTIAL IRISH MORTGAGE SECURITISATION NO. 12 LIMITED (Celtic 12) and Fastnet Securities 2 Plc (Fastnet 2). The affected ratings are listed at the end of this press release.

RATINGS RATIONALE

Today's rating action takes into account (i) the continued rapid deterioration in performance of the transactions; (ii) Moody's outlook for Irish RMBS sector; and (iii) structural features in place such as amount of available credit enhancement.

Key collateral assumptions revised

Celtic 12 and Fastnet 2 are performing worse than Moody's expectations as of the latest review in July 2011. As of April 2012, loans more than 90 days in arrears have increased to 16.8% of current balance in Celtic 12 and 13.2% in Fastnet 2, which constitutes an approximately 30% and 50% increase, respectively, compared to the levels as of June 2011. Cumulative losses realized since closing remain very low at 0.05% of original pool balance in Celtic 12 and 0.01% in Fastnet 2. Moody's notes that loss realization is slow for Irish RMBS given lengthy enforcement procedures in Ireland and moratorium imposed. For this reason, Moody's considers loans with delinquencies exceeding 360 days as a proxy for defaults. As of April 2012, the 360+ delinquencies in the transactions have increased by 50% to 70% compared to June 2011, reaching 6.4% of the current pool balance in both Celtic 12 and Fastnet 2.

Moody's expects that the increasing unemployment and lower income arising from the austerity measures will continue to hurt borrower's ability to fulfil their financial obligations. In addition to high arrears the loss severity will also be high as a result of the oversupply of housing, lack of refinancing and further decline in house prices, expected to be equal to approximately 60% to 70% decline from peak to trough in the base case. Approximately 60% of the portfolio in Celtic 12 and 55% in Fastnet 2 is currently in negative equity. Moody's has increased the portfolio expected loss assumptions to 11% of current pool balance for Celtic 12 and 10% for Fastnet 2, corresponding to 7.3% of original pool balance for Celtic 12 and 5.9% on original balance for Fastnet 2. Moody's has also increased its MILAN CE assumption to 30% in Celtic 12 and 27% for Fastnet 2.

Class A2 and A3 notes in Celtic 12 are paying sequentially switching to pro-rata payment in case of enforcement. The ratings of these notes take into account their relative position in the waterfall as well as the probability of a missed interest payment triggering a swith to a pro-rata repayment.

Factors and Sensitivity Analysis

Expected loss assumptions remain subject to uncertainty 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 the ratings in these transactions.

The new Irish personal insolvency legislation proposed in January could also have a negative impact on the ratings of the notes as it might lead to a write-down of the mortgage debt supporting the notes (see Moody's special report Proposed Irish Legislation Opens the Door To Widespread Debt Forgiveness published in February 2012).

As the euro area crisis continues the ratings of the notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could negatively impact the ratings of the notes. For more information please refer to the Rating Implementation Guidance published on 13 February 2012 "How Sovereign Credit Quality May Affect Other Ratings" and the special comment published on 19 January 2012 "Why Global Bank Ratings Are Likely to Decline in 2012".

Following the downgrade of Ireland's long-term government bond rating to Ba1, Moody's lowered the maximum achievable ratings in Ireland to A1 (sf). Furthermore, as discussed in Moody's special report "Rating Euro Area Governments Through Extraordinary Times -- An Updated Summary," published in October 2011, Moody's is considering reintroducing individual country ceilings for some or all euro area members, which could affect further the maximum structured finance rating achievable in those countries. Moody's is also continuing to consider the impact of the deterioration of sovereigns' financial condition and the resultant asset portfolio deterioration on mezzanine and junior tranches of structured finance transactions.

The principal methodology used in these ratings 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 tranche. The cash flow model evaluates all default scenarios that 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 (i) the probability of occurrence of each default scenario; and (ii) 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.12 Ltd.

....EUR487.5M A2 Notes, Downgraded to Ba1 (sf); previously on Jul 21, 2011 Downgraded to A1 (sf)

....EUR1010.685M A3 Notes, Downgraded to Ba3 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf)

....EUR39M B Notes, Downgraded to Ca (sf); previously on Mar 10, 2011 Downgraded to Caa1 (sf)

....EUR87.75M C Notes, Downgraded to Ca (sf); previously on Mar 10, 2011 Downgraded to Caa3 (sf)

Issuer: Fastnet Securities 2 PLC

....EUR1656M A2 Notes, Downgraded to Ba1 (sf); previously on Jul 21, 2011 Downgraded to Baa2 (sf)

....EUR50M B Notes, Downgraded to Caa2 (sf); previously on Mar 10, 2011 Downgraded to Ba2 (sf)

....EUR44M C Notes, Downgraded to Ca (sf); previously on Mar 10, 2011 Downgraded to B1 (sf)

....EUR56M D Notes, Downgraded to Ca (sf); previously on Mar 10, 2011 Downgraded to Caa2 (sf)

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

Barbara Rismondo
VP - Senior Credit Officer
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 ratings of Irish RMBS issued by Celtic 12 and Fastnet 2
No Related Data.
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