NOTE: On February 23, 2018, the press release was corrected as follows: the third sentence of the first paragraph of the press release was changed to “Today's reviews for downgrade primarily reflect placement of the long term counterparty risk assessment (CR Assessment) on review for downgrade for The Royal Bank of Scotland plc (RBS) acting as swap counterparty in the affected transactions (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_378787)”; in the RATINGS RATIONALE section, point (1) in the first sentence was changed to “(1) placement on review for downgrade of CR Assessment of The Royal Bank of Scotland plc (RBS) acting as swap counterparty in those three affected transactions,” and the second sentence of the Swap Counterparty Risks section was changed to “Moody's assessed the exposure to The Royal Bank of Scotland plc (A2(cr), review for possible downgrade) in relation to its role as swap counterparty in our rated transactions and, as a result, placed on review for downgrade the ratings of the notes which could be impacted should the CR Assessment of the counterparty be downgraded.” Revised release follows.
London, 20 February 2018 -- Moody's Investors Service has today placed on review for downgrade the
ratings of six notes in RMAC SECURITIES No. 1 PLC Series 2006-NS1,
RMAC 2005-NSP2 PLC and Paragon Mortgages (No. 9) PLC.
Additionally Moody's has placed on review for upgrade the ratings of two
notes and one Counterparty Instrument Rating (CIR) in Paragon Mortgages
(No.9) PLC . Today's reviews for downgrade primarily reflect placement of the long term counterparty risk assessment (CR Assessment) on review for downgrade for The Royal Bank of Scotland plc (RBS) acting as swap counterparty in the affected transactions (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_378787).
Today's reviews for upgrade reflect the decreased key collateral
assumptions as well as the increase in the levels of credit enhancement
for the affected notes.
Issuer: RMAC 2005-NSP2 PLC
....GBP26M Class M2a Notes, Aa2 (sf)
Placed Under Review for Possible Downgrade; previously on Jul 27,
2017 Upgraded to Aa2 (sf)
....EUR37M Class M2c Notes, Aa2 (sf)
Placed Under Review for Possible Downgrade; previously on Jul 27,
2017 Upgraded to Aa2 (sf)
Issuer: RMAC SECURITIES No. 1 PLC Series 2006-NS1
....GBP30M Class M1a Notes, Aa1 (sf)
Placed Under Review for Possible Downgrade; previously on Jul 27,
2017 Upgraded to Aa1 (sf)
....EUR59M Class M1c Notes, Aa1 (sf)
Placed Under Review for Possible Downgrade; previously on Jul 27,
2017 Upgraded to Aa1 (sf)
Issuer: Paragon Mortgages (No. 9) PLC
....GBP7M Class Ba Notes, Aa3 (sf) Placed
Under Review for Possible Downgrade; previously on Jun 27,
2017 Upgraded to Aa3 (sf)
....EUR29.5M Class Bb Notes,
Aa3 (sf) Placed Under Review for Possible Downgrade; previously on
Jun 27, 2017 Upgraded to Aa3 (sf)
....GBP3M Class Ca Notes, A3 (sf) Placed
Under Review for Possible Upgrade; previously on Jun 27, 2017
Affirmed A3 (sf)
....EUR66M Class Cb Notes, A3 (sf) Placed
Under Review for Possible Upgrade; previously on Jun 27, 2017
Affirmed A3 (sf)
....Cross Currency Swap for Class Cb Notes,
A3 (sf) Placed Under Review for Possible Upgrade; previously on Jun
27, 2017 Affirmed A3 (sf)
RATINGS RATIONALE
Today's actions reflect (1) placement on review for downgrade of CR Assessment of The Royal Bank of Scotland plc (RBS) acting as swap counterparty in those three affected transactions; and (2) deal deleveraging resulting in an increase
in credit enhancement for the affected tranches in Paragon Mortgages (No.9)
PLC.
-- Swap Counterparty Risks
The CR Assessments of The Royal Bank of Scotland plc and Royal Bank of
Scotland N.V., London Branch were placed on review
for downgrade on 30 January 2018. Moody's assessed the exposure to The Royal Bank of Scotland plc (A2(cr), review for possible downgrade) in relation to its role as swap counterparty in our rated transactions and, as a result, placed on review for downgrade the ratings of the notes which could be impacted should the CR Assessment of the counterparty be downgraded. Moody's analysis considered the risks of additional
losses on the notes if they were to become unhedged following a swap counterparty
default by using the CR Assessment as reference point for swap counterparties.
-- REVISION OF KEY COLLATERAL ASSUMPTIONS
As part of the rating action, Moody's reassessed its lifetime loss
expectation for the portfolio reflecting the collateral performance to
date.
In RMAC SECURITIES No. 1 PLC Series 2006-NS1, the
performance of has continued to be stable since last review. Total
delinquencies have decreased in the past year, with 90 days plus
arrears currently standing at 5.7% of current pool balance.
Cumulative losses currently stand at 1.9% of original pool
balance. Moody's decreased the EL assumption to 2.6%
as a percentage of original pool balance from 2.8%.
In RMAC 2005-NSP2 PLC and Paragon Mortgages (No. 9) PLC,
Moody's maintained the EL assumption unchanged at 1.4% and
1.25%, respectively.
Moody's has also assessed loan-by-loan information as a
part of its detailed transaction review to determine the credit support
consistent with target rating levels and the volatility of future losses.
As a result, Moody's has decreased the portfolio credit Milan
assumption to 14% for RMAC 2005-NSP2 PLC and 12%
for Paragon Mortgages (No. 9) PLC. Moody's has maintained
the Milan CE at 17.9% for RMAC SECURITIES No. 1 PLC
Series 2006-NS1.
-- Increase in Available Credit Enhancement
In Paragon Mortgages (No. 9) PLC , the pro-rata amortization
after the step-up date (May-2010) led to the increase in
the credit enhancement available for Class Ca and Class Cb notes to 5.3%
in November 2017 from 1.8% at closing date.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in September 2017.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The analysis undertaken by Moody's at the initial assignment of ratings
for RMBS securities may focus on aspects that become less relevant or
typically remain unchanged during the surveillance stage. Please
see Moody's Approach to Rating RMBS Using the MILAN Framework for further
information on Moody's analysis at the initial rating assignment and the
on-going surveillance in RMBS.
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) performance of the underlying collateral that is better than
Moody's expected, (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) an increase in sovereign risk (2) performance of the underlying
collateral that is worse than Moody's expected, (3) deterioration
in the notes' available credit enhancement and (4) deterioration in the
credit quality of the transaction counterparties.
Credit Rating: A Credit Rating is an opinion from Moody's Investors
Service (MIS) regarding the creditworthiness of an entity, a debt
or financial obligation, debt security, preferred share or
other financial instrument, or of an issuer of such a debt or financial
obligation, debt security, preferred share or other financial
instrument, issued using an established and defined ranking system
of rating categories.
Rating Review: A rating review indicates that a rating is under
consideration for a change in the near term. A rating can be placed
on review for upgrade (UPG), downgrade (DNG), or more rarely
with direction uncertain (UNC). A review may end with a rating
being upgraded, downgraded, or confirmed without a change
to the rating. Ratings on review are said to be on Moody's "Watchlist"
or "On Watch".
For further information on these definitions or on Moody's ratings symbols,
please consult the Rating Symbols and Definitions document on www.moodys.com
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.
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.
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 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.
The below contact information is provided for information purposes only.
Please see 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
the ratings.
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.
Gaby Trinkaus
Vice President - Senior 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
Masako Oshima
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Yuezhen Wang
Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Maria Turbica Manrique
VP-Senior Analyst
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