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Rating Action:

Moody's reviews ratings of 8 UK RMBS transactions

16 May 2013

Actions follow downgrade of Co-Operative Bank Plc

London, 16 May 2013 -- Moody's Investors Service has today placed on review for downgrade the ratings of 28 tranches in eight UK residential mortgage backed securities (RMBS) transactions sponsored by Co-Operative Bank. The rating actions follow Moody's downgrade of Co-Operative Bank from A3/Prime-2 to Ba3/Not Prime on 9 May 2013.

Moody's believes that the affected RMBS transactions are exposed to increased payment-disruption risk following the downgrade of Co-Operative Bank. Please see the end of the press release for a detailed list of notes affected by today's rating action.

RATINGS RATIONALE

Moody's has placed on review for downgrade the ratings in these transactions because of insufficient back-up servicing and back-up cash-management arrangements. In the case of Silk Road Finance Number Two PLC, the current servicing arrangement does not sufficiently mitigate the risk of a termination event under the cross-currency swap documentation.

Co-Operative Bank acts as a servicer and cash manager in Silk Road and Cambric series. Platform Funding Limited ("Platform"), which is part of Co-Operative Bank, acts as servicer and cash manager in Leek Finance series.

During the review Moody's will assess this risk and the mitigants that will be put in place in line with the criteria described in "Global Structured Finance Operational Risk Guidelines: Moody's Approach to Analyzing Performance Disruption Risk" published on 28 June 2011.

--- Leek Finance series

In Leek Finance Number Seventeen, Eighteen, Nineteen, Twenty and Twenty One Platform is the servicer and the cash manager. There is no back-up servicer or back-up cash manager appointed, no back-up servicer or back-up cash manager trigger, nor an independent back-up servicer or back-up cash manager facilitator. In Leek Finance Number Twenty Two, Co-Operative Bank must appoint a back-up servicer and step in as a cash manager if operational disruption occurs; however Moody's would not consider these arrangements effective in mitigating payment-disruption risk given the high degree of linkage to Co-Operative Bank.

Moody's placed on review all notes rated above A3(sf) in the Leek series, as the rating agency may downgrade these notes if Co-Operative Bank fails to put in place satisfactory remedies in the short-term.

--- Silk Road Finance Number One PLC

Co-Operative Bank is the servicer and cash manager and it undertakes to enter into back-up servicing and back-up cash management arrangements if Moody's downgrades its long-term ratings below Baa3. Moody's does not consider these arrangements satisfactory, given the absence of an independent back-up servicer and back-up cash manager facilitator that would ensure timely implementation of the remedies.

Co-Operative Bank is also the floating rate swap provider in Silk Road Number One. The swap is not compliant with Moody's de-linkage criteria as it does not contemplate any replacement or collateral posting and Moody's has given no value to it in rating and monitoring this transaction.

--- Silk Road Finance Number Two

Co-Operative Bank is the servicer and cash manager and there is no back-up servicer or back-up cash manager appointed. Structured Finance Management Limited (not rated) acts as a back-up servicer and back-up cash manager facilitator, and there is a trigger to appoint a back-up servicer and back-up cash manager within 60 days of Co-Operative Bank's long-term rating falling below Baa3. The transaction also contains estimation language to ensure continuity of payments.

Moody's believes that the timeframe that the documentation provides within which to appoint a back-up cash manager is too long, given that the senior notes are denominated in another currency and exposed to a cross-currency swap. Failure to make timely payments to the cross-currency swap provider could lead to a termination event under the swap documentation.

--- Silk Road Finance Number Three and Cambric Finance Number One

Today's rating action did not affect the ratings of notes in Silk Road Finance Number Three and Cambric Finance Number One. Moody's believes that in the absence of exposure to a cross-currency swap, payment-disruption mitigants are sufficient to maintain the current ratings if implemented within the timeframe that the transaction documents contemplate. In particular, Structured Finance Management Limited acts as a back-up servicer and back-up cash manager facilitator, and there is a trigger to appoint a back-up servicer and back-up cash manager within 60 days of Co-Operative Bank's long-term rating falling below Baa3. The transaction also contains estimation language to ensure continuity of payments.

--- Exposure to Co-Op as an issuer account bank

Exposure to Co-Op as an issuer account bank is not a driver of today's rating action. This exposure is mitigated by an equivalent amount of collateral deposited with a Prime-1 rated institution in all 10 RMBS transactions sponsored by Co-Op.

OTHER DEVELOPMENTS MAY NEGATIVELY AFFECT THE NOTES

Uncertainty stems from the timing of the necessary servicing and cash-management transfers. The ratings of all the notes would be negatively affected if a servicing transfer takes longer than Moody's would expect, following (1) an operational disruption; or (2) the inability to find replacement parties in a timely fashion.

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 further negatively affect the ratings of the notes.

METHODOLOGIES

The methodologies used in these ratings were Moody's Approach to Rating RMBS Using the MILAN Framework published in March 2013 and Global Structured Finance Operational Risk Guidelines: Moody's Approach to Analyzing Performance Disruption Risk" published in June 2011. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Moody's has not updated key modeling assumptions, sensitivities, cash-flow analysis and stress scenarios, as the rating action has been primarily driven by a review of operational risks.

LIST OF AFFECTED SECURITIES

Issuer: Leek Finance Number Seventeen PLC

....GBP270M A2a Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....US$462M A2b Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....EUR365M A2c Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....EUR105.6M Mc Notes, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa1 (sf)

....GBP22M Ba Notes, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa2 (sf)

....EUR39.5M Bc Notes, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa2 (sf)

....EUR48M Cc Notes, A2 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to A2 (sf)

Issuer: Leek Finance Number Eighteen PLC

....GBP171.1M A2a Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....US$475M A2b Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....EUR128M A2c Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....US$350M A2d Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....GBP12.5M Ma Notes, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa1 (sf)

....EUR83.7M Mc Notes, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa1 (sf)

....GBP25.9M Ba Notes, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa3 (sf)

....EUR26M Bc Notes, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa3 (sf)

Issuer: Leek Finance Number Nineteen PLC

....GBP110M A2a Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....US$624.1M A2b Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....EUR124.5M A2c Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

....GBP23M Ma Notes, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa1 (sf)

....EUR68M Mc Notes, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa1 (sf)

....GBP12M Ba Notes, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa3 (sf)

....EUR51M Bc Notes, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Nov 15, 2011 Upgraded to Aa3 (sf)

Issuer: Leek Finance Number Twenty PLC

....GBP1489M A Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Apr 10, 2013 Confirmed at Aaa (sf)

Issuer: Leek Finance Number Twenty One PLC

....GBP1017.7M A Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Oct 1, 2008 Assigned Aaa (sf)

Issuer: Leek Finance Number Twenty Two PLC

....GBP395.8M A Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Jan 27, 2009 Assigned Aaa (sf)

Issuer: Silk Road Finance Number One PLC

....GBP2500M A1 Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Feb 26, 2010 Definitive Rating Assigned Aaa (sf)

Issuer: Silk Road Finance Number Two PLC

....EUR500M Aa Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Jul 7, 2011 Definitive Rating Assigned Aaa (sf)

....GBP275M Ab Notes, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Jul 7, 2011 Definitive Rating Assigned Aaa (sf)

REGULATORY DISCLOSURES

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.

In conducting surveillance of these credits, Moody's considered performance data contained in servicer and remittance reports. Moody's obtains servicer reports on these transactions on a periodic basis, at least annually.

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.

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
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/Manager
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 reviews ratings of 8 UK RMBS transactions
No Related Data.
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