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Rating Action:

Moody's places ratings in three UK RMBS transactions on Review

20 Feb 2018

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

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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All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating 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 or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

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Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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