London, 11 May 2018 -- Moody's Investors Service ("Moody's") has today upgraded the ratings of
four Notes in Paragon Mortgages (No.9) PLC ("Paragon 9").
Moody's affirmed the ratings of the three senior Notes and the Counterparty
Instrument Rating (CIR), which had sufficient credit enhancement
to maintain the current ratings. The upgrades were prompted by
proposals to amend the swap documentation.
....GBP346M Class Aa Notes, Affirmed
Aa1 (sf); previously on Apr 13, 2018 Affirmed Aa1 (sf)
....EUR355M Class Ab Notes, Affirmed
Aa1 (sf); previously on Apr 13, 2018 Affirmed Aa1 (sf)
....US$60M Class Ac Notes, Affirmed
Aa1 (sf); previously on Apr 13, 2018 Affirmed Aa1 (sf)
....GBP7M Class Ba Notes, Upgraded to
Aa2 (sf); previously on Apr 13, 2018 Downgraded to A1 (sf)
....EUR29.5M Class Bb Notes,
Upgraded to Aa2 (sf); previously on Apr 13, 2018 Downgraded
to A1 (sf)
....GBP3M Class Ca Notes, Upgraded to
A1 (sf); previously on Apr 13, 2018 Upgraded to A2 (sf)
....EUR66M Class Cb Notes, Upgraded
to A1 (sf); previously on Apr 13, 2018 Upgraded to A2 (sf)
....Cross Currency Swap for Class Cb Notes,
Affirmed A1 (sf); previously on Apr 13, 2018 Upgraded to A1
(sf)
RATINGS RATIONALE
Today's upgrades reflect proposed amendments to the swap documentation
following the downgrade of the long-term senior unsecured debt
ratings of NatWest Markets plc ("NWM", formerly known as the Royal
Bank of Scotland plc) (Baa2/P-2, A3(cr)/P-2(cr)).
NWM acts as the swap counterparty in the transaction.
Moody's has been requested to assess the impact on the ratings of
the Notes issued by Paragon 9 of amendments to the swap documentation.
The Transfer Trigger is to reference NWM's Counterparty Risk Assessment,
instead of its long-term unsecured rating, and is set at
a minimum of A3(cr). Following the breach of collateral trigger,
NWM is required to post collateral in favour of the issuer. According
to the swap amendment, NWM will post the collateral in accordance
with enhanced formulas as defined in Moody's Approach to Assessing Counterparty
Risks in Structured Finance published in July 2017.
The upgrades of the tranches Ba, Bb, Ca and Cb reflect the
implementation of the aforementioned amendments to the swap documentation
and the sufficient credit enhancement available under these Notes.
The ratings of classes Aa, Ab, Ac, Ba, Bb,
Ca and Cb in Paragon 9 are constrained by swap counterparty exposure.
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
a rating for an RMBS security 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.
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.
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.
Germain-Pierre Fargue
Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Michelangelo Margaria
Senior Vice President/Manager
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
