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Rating Action:

Moody's takes actions on four UK non-conforming residential mortgage-backed securities

17 Dec 2015

Madrid, December 17, 2015 -- Moody's Investors Service has today upgraded the ratings of 7 notes, confirmed the ratings of 4 notes and affirmed the ratings of 15 notes in 4 UK non-conforming residential mortgage-backed securities (RMBS) transactions: Eurosail-UK 2007-3BL PLC, Eurosail-UK 2007-5NP PLC, Eurosail-UK 2007-6NC PLC and Mortgages No 6 plc.

Today's rating actions conclude the placement on review for upgrade of 10 notes placed on review for upgrade on 14 October 2015 (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_336422).

Please refer to the end of the Ratings Rationale section for a list of affected ratings.

RATINGS RATIONALE

Today's rating upgrades reflect (1) deleveraging of the transactions and (2) better than expected collateral performance.

Today's rating confirmations and affirmations reflect Moody's view that the available credit enhancement is sufficient to maintain the current rating on the affected notes.

--- INCREASE IN CREDIT ENHANCEMENT

Deal deleveraging resulted in an increase in credit enhancement for all of the affected notes. For instance, over the past year the credit enhancement for the most senior upgraded tranche increased to 11.8% from 10.7% in Eurosail-UK 2007-5NP PLC, to 23.6% from 21.8% in Eurosail-UK 2007-6NC PLC and to 22.3% from 21.5% in Mortgages No 6 plc.

--- KEY COLLATERAL ASSUMPTIONS

For Eurosail-UK 2007-3BL PLC, Eurosail-UK 2007-5NP PLC and Eurosail-UK 2007-6NC PLC the lifetime loss expectations and MILAN CE have not been updated as part of this review. The performance of the underlying asset portfolios remain in line with Moody's assumptions. Due to the reduced uncertainty in the sector, we have removed the additional stress analysis of key collateral assumption.

For Mortgages No 6 plc, Moody's has decreased its expected loss assumption to 1.10% of the original pool balance, down from 1.4%. The MILAN CE was not updated and remains in line with Moody's assumptions.

--- COUNTERPARTY EXPOSURE

Moody's rating analysis also took into consideration the exposure to key transaction counterparties including the roles of servicer, account bank and swap provider.

Acenden Limited (NR) acts as servicer and cash manager, with Homeloan Mangement Limited (NR) acting as back-up servicer in the three Eurosail transactions. Based on the current rating levels of the notes, only the senior notes issued by Eurosail-UK 2007-6NC PLC are constrained by operational risk.

In the case of Eurosail-UK 2007-5NP PLC and Eurosail-UK 2007-6NC PLC strong linkage to the issuer account bank Danske Bank A/S (A2/P-1), for which there is no effective replacement trigger, was incorporated into our analysis.

For Eurosail-UK 2007-5NP PLC, Eurosail-UK 2007-6NC PLC and Mortgages No 6 plc there is no swap in place. Notes and pool are denominated in GBP. We have considered any interest rate risk in our analysis. For Eurosail-UK 2007-3BL PLC there is also no swap in place. The notes are denominated in EUR, USD and GBP whilst the pool is denominated in GBP. We have considered the foreign currency risk and interest rate risk in our analysis.

For Eurosail-UK 2007-5NP PLC, tranches B1c, C1c and D1c and for Eurosail-UK 2007-6NC PLC, tranches B1a, C1a and D1a Moody's rating takes into consideration 1) the losses resulting from the tranche write-downs following the restructuring of Eurosail-UK 2007-5NP PLC in November 2013 (write-down of 28% of the original note principal balance) and of Eurosail-UK 2007-6NC PLC in February 2014 (write-down of 10% of the original note principal balance) and 2) any future losses to be incurred due to collateral performance. Moody's believes that the expected recovery rate on these notes is consistent with their current and, where applicable, revised ratings.

List of Affected Ratings:

Issuer: Mortgages No 6 plc

....GBP345M A2 Notes, Affirmed Aaa (sf); previously on Jan 30, 2012 Confirmed at Aaa (sf)

....GBP29.5M B Notes, Upgraded to Aaa (sf); previously on Oct 14, 2015 Aa3 (sf) Placed Under Review for Possible Upgrade

....GBP19.2M C Notes, Upgraded to Aa3 (sf); previously on Oct 14, 2015 A3 (sf) Placed Under Review for Possible Upgrade

....GBP7.4M D Notes, Affirmed Baa3 (sf); previously on Dec 7, 2004 Definitive Rating Assigned Baa3 (sf)

....GBP5.9M E Notes, Affirmed Ba1 (sf); previously on Dec 7, 2004 Definitive Rating Assigned Ba1 (sf)

Issuer: Eurosail-UK 2007-3BL PLC

....EUR64.5M A2a Notes, Confirmed at Ba2 (sf); previously on Oct 14, 2015 Ba2 (sf) Placed Under Review for Possible Upgrade

....US$100M A2b Notes, Confirmed at Ba2 (sf); previously on Oct 14, 2015 Ba2 (sf) Placed Under Review for Possible Upgrade

....GBP63M A2c Notes, Confirmed at Ba2 (sf); previously on Oct 14, 2015 Ba2 (sf) Placed Under Review for Possible Upgrade

....EUR215M A3a Notes, Affirmed B2 (sf); previously on Nov 4, 2011 Confirmed at B2 (sf)

....GBP64.5M A3c Notes, Affirmed B2 (sf); previously on Nov 4, 2011 Confirmed at B2 (sf)

....EUR15M B1a Notes, Affirmed Ca (sf); previously on Dec 21, 2010 Downgraded to Ca (sf)

....GBP23M B1c Notes, Affirmed Ca (sf); previously on Dec 21, 2010 Downgraded to Ca (sf)

....EUR25M C1a Notes, Affirmed Ca (sf); previously on Dec 21, 2010 Downgraded to Ca (sf)

....GBP10M C1c Notes, Affirmed Ca (sf); previously on Dec 21, 2010 Downgraded to Ca (sf)

....EUR25.5M D1a Notes, Affirmed Ca (sf); previously on Dec 21, 2010 Downgraded to Ca (sf)

....GBP5.5M E1c Notes, Affirmed Ca (sf); previously on Dec 21, 2010 Downgraded to Ca (sf)

Issuer: Eurosail-UK 2007-5NP PLC

....GBP439.1M A1a Notes, Upgraded to A1 (sf); previously on Oct 14, 2015 A3 (sf) Placed Under Review for Possible Upgrade

....GBP75M A1c Notes, Upgraded to A1 (sf); previously on Oct 14, 2015 A3 (sf) Placed Under Review for Possible Upgrade

....GBP29.04M B1c Notes, Confirmed at Caa3 (sf); previously on Oct 14, 2015 Caa3 (sf) Placed Under Review for Possible Upgrade

....GBP18.69M C1c Notes, Affirmed Ca (sf); previously on Feb 7, 2014 Affirmed Ca (sf)

....GBP13.22M D1c Notes, Affirmed Ca (sf); previously on Feb 7, 2014 Affirmed Ca (sf)

Issuer: Eurosail-UK 2007-6NC PLC

....GBP79.6M A2a Notes, Affirmed Aa1 (sf); previously on Dec 8, 2014 Upgraded to Aa1 (sf)

....GBP122.1001M A3a Notes, Upgraded to Aa2 (sf); previously on Oct 14, 2015 A2 (sf) Placed Under Review for Possible Upgrade

....GBP21.7M B1a Notes, Upgraded to Caa2 (sf); previously on Oct 14, 2015 Caa3 (sf) Placed Under Review for Possible Upgrade

....GBP15.5M C1a Notes, Upgraded to Caa3 (sf); previously on Jun 5, 2014 Affirmed Ca (sf)

....GBP13M D1a Notes, Affirmed Ca (sf); previously on Jun 5, 2014 Affirmed Ca (sf)

The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in January 2015. Please see the Credit Policy 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 exceeds Moody's expectations; (2) deleveraging of the capital structure; and (3) improvements in the credit quality of the transaction counterparties.

Conversely, factors or circumstances that could lead to a downgrade of the ratings include (1) an increased probability of high-loss scenarios owing to a downgrade of the country ceiling; (2) performance of the underlying collateral that does not meet Moody's expectations; (3) deterioration in the notes' available CE; 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.

The relevant office for each credit rating is identified in "Debt/deal box" on the Ratings tab in the Debt/Deal List section of each issuer/entity page of the Website.

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 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.

Maria Turbica Manrique
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Masako Oshima
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Gaby Trinkaus
AVP - Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Bayo Yoloye
Associate Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's takes actions on four UK non-conforming residential mortgage-backed securities
No Related Data.
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