London, 29 November 2010 -- Moody's Investors Service has today placed under review for possible upgrade
the following two classes of notes issued by the following UK Buy-to-Let
transaction:
- First Flexible No. 5 plc ("First Flexible 5"):
Classes M and B.
The review was prompted by better-than-expected performance
of the collateral backing the notes as well as credit enhancement build-up
since closing. Moody's expects to conclude its rating review within
six months.
Also Moody's Investors Service has today updated loss assumptions in the
11 UK Buy-to-Let RMBS transactions listed below (the affected
transactions) and has taken no rating action, in consideration of
the sufficient levels of credit enhancement currently available in the
structures.
- Auburn Securities 5 PLC;
- Ludgate Funding Series 2007-FF1; and
- Paragon Mortgages No. 7, 8, 9, 10,
11, 12, 13, 14 and 15 PLC.
Moody's has increased its lifetime loss assumption in the affected transactions,
as the performance of the underlying mortgage portfolios to date has been
worse than previously assumed. In 1 out of the 11 affected transactions,
Moody's has also increased its Milan AaaCE assumption, following
the assessment of updated loan-by-loan information of the
outstanding portfolio. The lifetime loss and the MILAN Aaa credit
enhancement are the key parameters used by Moody's to calibrate its loss
distribution curve, which is one of the core inputs in our cash-flow
model.
The review of First Flexible 5 and the update of loss assumptions in the
affected transactions follows a portfolio review of the performance of
22 Moody's rated non-master trust RMBS transactions with
a Buy-to-Let concentration of over 35%. The
list of transactions included in the portfolio review can be found under
this link
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF227101.
Moody's has also factored into its analysis the negative sector outlook
for UK RMBS. The sector outlook reflects the following expectations
of key macro-economic indicators: GDP to increase by 1.6%
in 2010 and by 2.3% in 2011, unemployment to stay
at approximately 7.9% in 2010 and 2011, house prices
to remain relatively flat over the next year. For transaction specific
performance, please refer to Moody's Performance Overviews available
on www.moodys.com.
TRANSACTION OVERVIEWS
First Flexible 5 closed in June 2002. Loans more than 90 days in
arrears (including loans under receivership of rent) currently correspond
to 0.80% of the current portfolio balance, while cumulative
losses amount to 0.07% of the original portfolio balance.
The transaction has a current pool factor of 19.6%.
The credit enhancement (excluding gross excess spread) of Class M and
Class B notes has increased to 21.1% from 3.9%
at closing and to 8.7% from 1.4% at closing,
respectively.
Auburn Securities 5 PLC closed in September 2005. Loans more than
90 days in arrears and loans in repossession currently correspond to 1.39%
and 1.02% of the current portfolio balance respectively,
while cumulative losses amount to 0.33% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 1.07% at closing to 1.75%
of the original portfolio balance and it has maintained its Milan AaaCE
at 14.96% of the current portfolio balance.
Ludgate Funding Series 2007-FF1 closed in June 2007. Loans
more than 90 days in arrears (including outstanding repossessions) currently
correspond to 4.87% of the current portfolio balance,
while cumulative losses amount to 1.04% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 1.7% at closing to 3% of the original
portfolio balance and it has revised its Milan AaaCE from 18.4%
to 21.5% of the current portfolio balance.
Paragon Mortgages (No. 7) PLC closed in May 2004. Loans
more than 90 days in arrears (including loans under receivership of rent)
currently correspond to 1.12% of the current portfolio balance,
while cumulative losses amount to 0.36% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 0.84% at closing to 1.5%
of the original portfolio balance and it has maintained its Milan AaaCE
at 13% of the current portfolio balance.
Paragon Mortgages (No. 8) PLC closed in October 2004. Loans
more than 90 days in arrears (including loans under receivership of rent
and outstanding repossessions) currently correspond to 0.68%
of the current portfolio balance, while cumulative losses amount
to 0.31% of the original portfolio balance. Taking
into account the performance of the underlying mortgage portfolio to date,
Moody's has increased its lifetime loss expectations from 0.80%
at closing to 1.5% of the original portfolio balance and
it has maintained its Milan AaaCE at 18% of the current portfolio
balance.
Paragon Mortgages (No. 9) PLC closed in July 2005. Loans
more than 90 days in arrears (including loans under receivership of rent)
currently correspond to 1.02% of the current portfolio balance,
while cumulative losses amount to 0.40% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 0.94% at closing to 1.5%
of the original portfolio balance and it has maintained its Milan AaaCE
at 17.77% of the current portfolio balance.
Paragon Mortgages (No. 10) PLC closed in November 2005.
Loans more than 90 days in arrears (including loans under receivership
of rent) currently correspond to 0.90% of the current portfolio
balance, while cumulative losses amount to 0.45% of
the original portfolio balance. Taking into account the performance
of the underlying mortgage portfolio to date, Moody's has increased
its lifetime loss expectations from 1.01% at closing to
1.5% of the original portfolio balance and it has maintained
its Milan AaaCE at 15.88% of the current portfolio balance.
Paragon Mortgages (No. 11) PLC closed in March 2006. Loans
more than 90 days in arrears (including loans under receivership of rent)
currently correspond to 1.08% of the current portfolio balance,
while cumulative losses amount to 0.27% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 0.97% at closing to 1.5%
of the original portfolio balance and it has maintained its Milan AaaCE
at 19.48% of the current portfolio balance.
Paragon Mortgages (No. 12) PLC closed in July 2006. Loans
more than 90 days in arrears (including loans under receivership of rent)
currently correspond to 0.83% of the current portfolio balance,
while cumulative losses amount to 0.12% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 1% at closing to 1.25% of the original
portfolio balance and it has maintained its Milan AaaCE at 16.23%
of the current portfolio balance.
Paragon Mortgages (No. 13) PLC closed in October 2006. Loans
more than 90 days in arrears (including loans under receivership of rent)
currently correspond to 1.13% of the current portfolio balance,
while cumulative losses amount to 0.13% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 1% at closing to 1.5% of the original
portfolio balance and it has maintained its Milan AaaCE at 15.6%
of the current portfolio balance.
Paragon Mortgages (No. 14) PLC closed in March 2007. Loans
more than 90 days in arrears (including loans under receivership of rent)
currently correspond to 1.19% of the current portfolio balance,
while cumulative losses amount to 0.16% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 1% at closing to 1.5% of the original
portfolio balance and it has maintained its Milan AaaCE at 17%
of the current portfolio balance.
Paragon Mortgages (No. 15) PLC closed in July 2007. Loans
more than 90 days in arrears (including loans under receivership of rent)
currently correspond to 1.52% of the current portfolio balance,
while cumulative losses amount to 0.18% of the original
portfolio balance. Taking into account the performance of the underlying
mortgage portfolio to date, Moody's has increased its lifetime loss
expectations from 1% at closing to 1.75% of the original
portfolio balance and it has maintained its Milan AaaCE at 17.2%
of the current portfolio balance.
REVIEW PROCESS
In identifying the affected transactions, Moody's conducted a portfolio
review of 22 Moody's rated non-master trust RMBS transactions
with a Buy-to-Let concentration of over 35%.
The list of transactions included in the portfolio review can be found
under this link
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF227101.
During the analysis, the rating agency took into account the performance
of the collateral to date, its deviation from Moody's expectations
as well as the levels of credit enhancement available to absorb the future
projected losses on the respective portfolios. Within the UK Buy-to-Let
RMBS sector, the mortgage portfolios in the affected transactions
have shown a deviation from Moody's performance expectations. After
taking into account the level of credit enhancement in each structure,
Moody's has taken no rating action on the affected transactions
due to the current level of credit enhancement sufficiently supporting
the current ratings of the notes.
The full review of the ratings of Classes M and B of First Flexible 5
will take into account the current capital structure of the transaction.
As part of its detailed transaction review, Moody's will reassess
its lifetime loss expectation reflecting the collateral performance to
date as well as the future macro-economic environment. Moody's
will also request updated loan-by-loan information to revise
its MILAN Aaa credit enhancement. Loan-by-loan information
will also allow Moody's to validate its assumptions with regards to which
loans have a higher default propensity. The lifetime loss and the
MILAN Aaa credit enhancement are the key parameters used by Moody's to
calibrate its loss distribution curve, which is one of the core
inputs in our cash-flow model.
LIST OF AFFECTED NOTES
The classes of notes affected by today's rating review are detailed below.
Issuer: First Flexible No. 5 plc
....GBP22M M Notes, A1 (sf) Placed Under
Review for Possible Upgrade; previously on Jun 12, 2002 Assigned
A1 (sf)
....GBP12M B Notes, Baa2 (sf) Placed
Under Review for Possible Upgrade; previously on Jun 12, 2002
Assigned Baa2 (sf)
Moody's ratings address the expected loss posed to investors by the legal
final maturity of the notes. Moody's ratings address only the credit
risks associated with the transactions. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
Moody's will continue to monitor closely the above transactions.
The principal methodologies used in rating and/or monitoring this transaction
were "Moody's Approach to Rating UK RMBS" published in April 2005,
"Moody's Updated Methodology for Rating UK RMBS" published in November
2007 and "Revising Default/Loss Assumptions Over the Life of an ABS/RMBS
Transaction" published in December 2008, available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website. In
addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
For further information, please visit our website www.moodys.com
or contact Moody's Client Service Desk (+44 20) 7772 5454.
London
Maria Divid
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
Moody's updates assumptions in 11 UK Buy-to-Let transactions and places 1 UK Buy-to-Let transaction on review for possible upgrade
