22 Irish RMBS ratings placed on review for downgrade
London, 12 September 2012 -- Moody's Investors Service has today downgraded to A3(sf) the ratings of
24 securities across 12 Irish residential mortgage-backed securities
(RMBS) out of which 7 were also placed on review for downgrade.
Concurrently, Moody's has placed on review for downgrade additional
15 Irish RMBS securities (senior and subordinated notes).
Today's rating downgrades follow Moody's decision to lower the Irish country
ceiling to A3 on 6 September 2012. See "Moody's adjusts
Ireland's country ceiling to A3" (http://www.moodys.com/research/Moodys-adjusts-Irelands-country-ceiling-to-A3--PR_254541).
The main driver for today's rating review placements is Moody's
intention to reassess credit enhancement adequacy for each of the rated
notes, given the increased risk of economic and financial instability.
As part of today's rating action, Moody's has concluded
its review of 10 ratings in 3 Irish RMBS transactions that were placed
on review for downgrade on the 14 May due to low level of credit enhancement
in consideration of the large exposure to negative equity loans in the
underlying collateral. The credit enhancement available to the
senior notes has substantially increased following a restructuring of
these transactions executed in August. Moody's has concluded
that the current credit enhancement is consistent with the current rating
of the notes.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297259
for the list of affected credit ratings. This list is an integral
part of this press release. For a detailed rationale on each rating
action, please refer to the list of affected credit ratings.
RATINGS RATIONALE
--DRIVER FOR DOWNGRADE: NEW COUNTRY CEILING
On 6 September 2012, Moody's adjusted to A3 the Irish country ceiling,
which signifies the maximum rating that Moody's will assign to a domestic
issuer, including structured finance transactions backed by Irish
receivables. As a consequence, the highest achievable rating
for Irish structured finance transactions is now A3(sf), down from
A1(sf).
Ireland's new country ceiling, reflects the elevated risk
for economic and financial dislocations in Ireland. The weakness
of the economy constitutes a substantial risk factor to non-government
issuers in Ireland because income and access to liquidity and funding
could be sharply curtailed to all classes of borrowers. The lower
ceiling also reflects the risk of exit and redenomination in the unlikely
event of a default by the sovereign.
-- DRIVER FOR REVIEW PLACEMENT: REASSESSMENT OF CREDIT
ENHANCEMENT ADEQUACY FOR SENIOR AND SUBORDINATED NOTES
Moody's has placed on review for downgrade the ratings of 22 Irish senior
and subordinated notes in order to reassess credit enhancement adequacy
levels, given the higher risk of economic and financial instability.
Irish securities placed on review for potentially inadequate credit enhancement
failed to meet credit enhancement levels consistent with severe loss scenarios.
-- CONCLUSION OF PREVIOUS RATING REVIEWS: INCREASED
CREDIT ENHANCEMENT FOLLOWING RESTRUCTURING
CELTIC RESIDENTIAL IRISH MORTGAGE SECURITISATION NO. 14,
CELTIC RESIDENTIAL IRISH MORTGAGE SECURITISATION NO. 15 and CELTIC
RESIDENTIAL IRISH MORTGAGE SECURITISATION NO. 16 LTD were restructured
in August 2012. As a consequence, Moody's has concluded
that the increased credit enhancement levels are consistent with the current
ratings of the senior notes. As of the next interest payment date,
the credit enhancement will increase to 55% from 35% in
CELTIC 14, to 50% from 32% in CELTIC 15 and to 45%
from 32% in CELTIC 16.
-- OTHER DEVELOPMENTS MAY NEGATIVELY AFFECT THE NOTES
As the euro area crisis continues, the ratings of structured finance
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 affect the ratings of the notes.
Key modelling assumptions, sensitivities, cash-flow
analysis and stress scenarios for the affected transactions have not been
updated, as the rating actions have been primarily driven by (1)
the lowering of Ireland's country ceiling; and, as a
consequence, (2) Moody's decision to assess credit enhancement levels
consistent with each structured finance rating category.
PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was Moody's Approach to
Rating RMBS in Europe, Middle East, and Africa published in
June 2012. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's approach to country risk ceilings is described in Local-Currency
Country Risk Ceiling for Bonds and Other Local Currency Obligations (http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_140182),
published on 16 August 2012.
On 21 August 2012, Moody's released a Request for Comment seeking
market feedback on proposed adjustments to its modelling assumptions.
These adjustments are designed to account for the impact of rapid and
significant country credit deterioration on structured finance transactions.
If the adjusted approach is implemented as proposed, the rating
of the notes affected by today rating action may be negatively affected.
See "Approach to Assessing the Impact of a Rapid Country Credit Deterioration
on Structured Finance Transactions", (http://www.moodys.com/research/Approach-to-Assessing-the-Impact-of-a-Rapid-Country-Credit--PBS_SF294880)
for further details regarding the implications of the proposed methodology
changes on Moody's ratings.
The rating considerations described in this press release complement the
principal rating methodologies applicable to Irish RMBS transactions affected
by today's rating action (see link provided above in this press release
for a full list of affected credit ratings).
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.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
analyst and the Moody's legal entity that has issued each of the
ratings.
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.
Sebastian?Hoepfner
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
Senior Vice President
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Maria Divid
Analyst
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 to A3(sf) ratings of 24 Irish RMBS securities
