Approximately GBP 5.2 billion of debt securities affected.
London, 26 June 2009 -- Moody's Investors Service has today placed under review for possible downgrade
notes issued by the following 13 UK non-conforming RMBS transactions
(the "Affected Transactions"):
- Alba 2005-1 Plc, Class C, Class D and Class
E;
- Great Hall Mortgages No.1 Plc Series 2007-01;
- Great Hall Mortgages No.1 Plc Series 2007-02;
- Leek Finance Number Nineteen Plc;
- Money Partners Securities 3 Plc (MPS 3);
- Money Partners Securities 4 Plc (MPS 4);
- Newgate Funding Plc: Series 2006-1;
- Newgate Funding Plc: Series 2006-2;
- Newgate Funding Plc: Series 2006-3;
- Newgate Funding Plc: Series 2007-1;
- Newgate Funding Plc: Series 2007-2;
- RMAC SECURITIES No. 1 Plc Series 2007-NS1;
and
- Uropa Securities Plc Series 2007-01B.
All classes of notes issued by the above transactions (except for the
MERC certificates) are being placed on review, unless otherwise
specified. A complete list of all the 133 affected tranches placed
under review today can be found in the attached spreadsheet (see the link
at the end of this press release).
Today's rating actions were prompted by further deterioration of the collateral
performance at levels higher than those currently expected by Moody's.
Due to worse-than-expected performance, Moody's
will also review the ratings of the notes issued by the following 14 transactions
(the "Additional Transactions"):
- Eurosail 2006-1;
- Eurosail 2006-2BL Plc;
- Eurosail 2006-3NC Plc;
- Eurosail UK 2007-1NC Plc;
- Marble Arch Residential Securitisation No. 4 Plc;
- Preferred Residential Securities 05-1 Plc;
- Preferred Residential Securities 05-2 Plc;
- Preferred Residential Securities 06-1 Plc;
- Southern Pacific Financing 05-B Plc;
- Southern Pacific Securities 05-1 Plc;
- Southern Pacific Securities 05-2 Plc;
- Southern Pacific Securities 05-3 Plc;
- Southern Pacific Financing 06-A Plc; and
- Southern Pacific Securities 06-1 Plc.
The ratings of the notes relating to the Additional Transactions are already
on review because of the exposure to hedging agreements provided by Lehman
Brothers Special Financing Inc. and guaranteed by Lehman Brothers
Holdings Inc ("LBHI") and/or because of the exposure to entities
ultimately owned by LBHI performing the servicing and cash management
functions.
The review of the Additional Transactions will cover their entire capital
structures. However, due to their higher levels of seasoning,
in the case of Preferred Residential Securities 05-1 Plc,
Preferred Residential Securities 05-2 Plc, Southern Pacific
Financing 05-B Plc, Southern Pacific Securities 05-1
Plc, Southern Pacific Securities 05-2 Plc and Southern Pacific
Securities 05-3 Plc, the rating impact of the worse-than-expected
performance is likely to be limited to the junior and mezzanine tranches,
according to the performance data as of today.
In identifying for review the 27 UK non-conforming RMBS transactions
listed above, Moody's has taken into account the performance
of the collateral to date, its deviation from Moody's expectations
as well as the levels of credit enhancement available to absorb the losses
on the respective portfolios. Within the UK non-conforming
RMBS sector, these transactions have shown a material deviation
from Moody's performance expectations. As an example,
since closing, Southern Pacific Securities 05-3 Plc has experienced
cumulative losses equal to 2.4% of the original portfolio
balance, versus our initial lifetime assumption of 2.28%.
In this transaction 29% of the initial pool is still outstanding
and the 90+ delinquencies, including outstanding repossessions,
equal approximately 42% of the current portfolio balance.
The worse than-expected-performance, after taking
into account the level of credit enhancement in each structure,
has prompted a full review of the ratings of the related notes,
which will be concluded over the course of the next six months.
Moody's has also factored into its analysis the negative sector outlook
for UK non-conforming RMBS. The sector outlook reflects
the following expectations of key macro-economic indicators:
GDP to contract by 3.8% in 2009, followed by minimal
growth of 0.1% in 2010, unemployment to increase to
9.4% by 2010 from 7.2% today, house
prices to decrease by over 30% from its peak in 2007 to a trough
in 2010 and further increases in personal insolvencies. For detailed
information please see Moody's Economy.Com or for transaction specific
performance, please refer to Moody's Performance Overviews
available on www.moodys.com.
As part of our detailed transaction review, we will reassess for
each portfolio its lifetime loss expectation reflecting the collateral
performance to date as well as the future macro-economic environment.
Moody's will also request, whenever not already available,
updated loan-by-loan information to revise its MILAN Aaa
credit enhancement. Loan-by-loan information will
also permit us to validate our assumptions with regards to which loans
have a higher default propensity. The lifetime loss and the MILAN
Aaa credit enhancement are the key parameters used by Moody's to calibrate
its loss distribution curve, which is one of the core inputs in
the cash-flow model.
As part of our review, we will also consider the concerns the FSA
raised in its press release published on 22 June 2009. In this
press release, the FSA had found continued weaknesses in the way
specialist lending firms and third party administrators are handling mortgage
arrears and repossessions. One of the effects for the outstanding
UK Non-conforming RMBS transactions could be further changes to
transaction documentation permitting for example more loan modifications
going forward.
Moody's ratings address the expected loss posed to investors by the legal
final maturity of the notes. Moody's ratings address only the credit
risks associated with the transactions. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors. Moody's will continue to monitor closely
the above transactions.
Moody's initially analysed and monitors these transactions using the rating
methodology for EMEA RMBS as described in the Rating Methodology reports
"Moody's Approach to Rating UK RMBS" published in April 2005, "Moody's
Updated Methodology for Rating UK RMBS" published in November 2007 and
"Revising Default/Loss Assumptions Over the Life of an ABS/RMBS Transaction"
published in December 2008. Please also refer to the "UK Non-Conforming
RMBS Q1 2009 Indices", which can be found on www.moodys.com
under the Credit Index category of Structured Finance research.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Credit Policy & Methodologies
directory.
For further information, please visit our website www.moodys.com
or contact Moody's Client Service Desk (+44 20) 7772 5454.
Excel:
www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBS_SF170631
Frankfurt
Marie-Jeanne Kerschkamp
Managing Director
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Giacomo Bonetti
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places on review for downgrade 13 UK NC RMBS transactions and comments on 14 other UK NC RMBS transactions