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16 Apr 2014
London, 16 April 2014 -- Moody's Investors Service has today placed on review for upgrade 30 tranches
in 13 UK non-conforming residential mortgage securities (RMBS)
transactions. Better than expected collateral performance and an
increase in available credit enhancement drove today's rating action.
Please click here http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF364723
for the list of affected credit ratings and methodologies used.
The list is an integral part of this press release.
RATINGS RATIONALE
Today's review for upgrade reflects (1) better than expected collateral
performance in five transactions, and/or (2) an increase in available
credit enhancement in all 13 affected transactions.
--- Collateral performance
In five transactions (Mansard Mortgages 2006-1 PLC, Preferred
Residential Securities 7 PLC, Southern Pacific Securities 04-1
plc, Southern Pacific Securities 05-1 plc and Southern Pacific
Securities 06-1 plc) collateral performance has been better than
the rating agency expected during the previous rating action. Actual
loss realisation has been below Moody's projections in all five
affected deals, while the share of loans delinquent by more than
90 days (including outstanding repossessions) decreased substantially
in Mansard Mortgages 2006-1 PLC, Southern Pacific Securities
05-1 plc and Southern Pacific Securities 06-1 plc.
During the review Moody's will assess updated loan-by-loan
information, consider the current amount of realised losses and
complete roll-rate analysis for the non-defaulted portion
of the portfolio to revise its collateral performance assumptions.
In the remaining eight transactions, the collateral performance
has been in line with Moody's expectations.
--- Increase in available credit enhancement
The affected tranches benefited from substantial increase in available
credit enhancement since the last rating action. The increase is
driven by either (1) deleveraging, or a combination of deleveraging
with (2) excess spread capture.
(1) All affected tranches benefit from increased credit enhancement due
to non-amortising reserve funds either from closing, or following
cumulative loss trigger breaches. Sequential amortisations since
the last rating action further increased credit enhancement available
to mezzanine and senior tranches. As of March 2014, only
Mansard Mortgages 2007-1 PLC is amortising pro-rata while
the other affected transactions are amortising sequentially.
(2) Excess spread capture resulted in a further increase of available
credit enhancement in nine affected transactions in addition to the deleveraging.
In seven deals (Bluestone Securities plc - Series 2007-1,
Eurosail 2006-1, Mansard Mortgages 2007-1 PLC,
Newgate Funding PLC: Series 2006-1, Newgate Funding
PLC: Series 2006-2, Preferred Residential Securities
05-1 PLC and Southern Pacific Securities 06-1 plc) reserve
funds were not fully funded as of the latest rating action. The
reserve funds in these deals are currently fully funded due to the excess
spread capture. In two deals, (Mansard Mortgages 2006-1
PLC and Marble Arch Residential Securitisation No. 4 plc) high
cumulative losses resulted in a fully depleted reserve fund and an unpaid
balance in the principal deficiency ledger. These unpaid balances
have since been covered through excess spread capture while the reserve
fund is fully funded in Marble Arch Residential Securitisation No.
4 plc and 64% funded in Mansard Mortgages 2006-1 PLC.
Moody's also notes that the standby liquidity facility drawdown
fees of those transaction, if any, did not offset the beneficial
impact of improved collateral performance and/or increased credit enhancement.
Standby liquidity facility drawing fees are a feature present in many
UK non-conforming transactions, which reduces available excess
spread as such fees are not amortising in line with the pool balance.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Factors or circumstances that could lead to an upgrade of the ratings
include (1) a better than expected performance of the underlying collateral
(2) deleveraging of the capital structure and (3) improvements in the
credit quality of the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the ratings
include (1) a worse than expected performance of the underlying collateral
(2) deterioration in the notes' available credit enhancement and (3) deterioration
in the credit quality of the transaction counterparties.
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.
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.
Lyudmila Udot
Asst Vice President - 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
Christophe de Noaillat
MD - Structured Finance
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 places on review for upgrade 30 tranches in 13 UK non-conforming RMBS transactions
No Related Data.
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