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Rating Action:

Moody's downgrades three classes of UK Housing Association Notes issued by Finance for Residential Social Housing PLC (Fresh)

06 Apr 2018

Approximately GBP 962 million of debt affected

London, 06 April 2018 -- Moody's Investors Service (Moody's) has today taken rating actions on the following UK Housing Association Notes issued by Finance for Residential Social Housing PLC (Fresh):

....GBP727.88M Ser. 1 - A1 Notes, Downgraded to Aa3 (sf); previously on Feb 5, 2018 Aa2 (sf) Placed Under Review for Possible Downgrade

....GBP115.91M Ser. 1 - A2 Notes, Downgraded to Aa3 (sf); previously on Feb 5, 2018 Aa2 (sf) Placed Under Review for Possible Downgrade

....GBP37.09M Ser. 1 - A3 Notes, Affirmed A3 (sf); previously on Sep 28, 2017 Downgraded to A3 (sf)

....GBP37.09M Ser. 1 - B Notes, Affirmed Baa3 (sf); previously on Sep 28, 2017 Affirmed Baa3 (sf)

....GBP40.92M Ser. 2 - A Notes, Downgraded to Aa3 (sf); previously on Feb 5, 2018 Aa2 (sf) Placed Under Review for Possible Downgrade

....GBP3.11M Ser. 2 - B Notes, Affirmed Baa3 (sf); previously on Sep 28, 2017 Affirmed Baa3 (sf)

Moody's does not rate the Series 3-C Notes.

RATINGS RATIONALE

Today's downgrade action is driven by the transaction's exposure to the account bank, The Royal Bank of Scotland plc ("RBS") and follows its downgrade to Baa2, P-2 on 4 April 2018. For further details please refer to the press release on www.moodys.com at: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_380516. The rating action concludes the rating review, which was initiated on 5 February 2018.

Moody's had previously determined the A3 rating replacement trigger of the transaction's account bank as ineffective because RBS was not replaced as account bank following its downgrade to Baa1 from A3 on 13 March 2014. The transaction was amended in May 2016 to include a collateral agreement whereby RBS would post collateral in the form of cash and/or securities to support its obligations as the issuer account bank if its long term deposit rating was downgraded below A3 (collateral trigger level).

Moody's has been provided with information that The Bank of New York Mellon, London Branch has been appointed as the custodian bank. Additionally, collateral in the form of UK gilts is being posted to the custodian bank and would be used to pay Noteholders if RBS defaulted.

While the existence of the collateral arrangement does not fully mitigate the lack of an effective trigger, it does reduce significantly the exposure to RBS. As such, Moody's has given partial credit by reassessing the transaction's exposure as 'standard' rather than 'strong'. Considering the ineffective replacement trigger and "standard" exposure, the maximum achievable rating for this transaction is Aa3 (sf).

Moody's assesses the Issuer's exposure to the account bank in accordance with its cross-sector methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in July 2017.

The affirmation of the remaining Notes is based on the underlying stable performance of the transaction.

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was "Moody's Approach to Rating EMEA CMBS Transactions" published in November 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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

Main factors or circumstances that could lead to a downgrade of the ratings are (i) an increase in default risk assessment driven by a change in the ratings or credit estimates of the underlying borrowers or (ii) a decline in the property values backing the underlying loans or (iii) a deterioration in the credit of the counterparties, especially the account bank and/or failure to post collateral or take suitable action as required by the collateral agreement.

Main factors or circumstances that could lead to an upgrade of the ratings are (i) a decrease in default risk assessment driven by a change in the ratings or credit estimates of the underlying borrowers or (ii) an improvement in the property values backing the underlying loans or (iii) an improvement in the rating of the account bank or the replacement of the current account bank with a higher rated bank.

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 use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

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 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Sarwesh Paradkar
AVP - 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

Andrea M. Daniels
Associate Managing Director
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

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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