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30 Sep 2010
London, 30 September 2010 -- Moody's Investors Service has been asked to assess the impact on the ratings
of the Notes issued out of the Holmes Master Trust following a proposal
to restructure the trust. On the 8 October 2010 Santander UK PLC
(i) make a refinancing contribution to repay all amounts currently outstanding
under the Second Master Issuer Term Advances which correspond to the Second
Master Issuer Notes. These notes were previously retained by the
(ii) repurchase around GBP 36 billion of trust collateral and remove the
minimum trust size trigger; and
(iii) add a redemption reserve of GBP 5.8 billion from which then
existing funding notes may be repaid should principal receipts generated
from the trust be insufficient at their scheduled maturity dates.
This reserve is available prior to an asset trigger event. Should
there be a PDL on a subordinated class then the amount of redemption reserve
which may be applied is correspondingly reduced.
In Moody's opinion this restructuring of the trust property will not impact,
in and of itself, the current ratings assigned to any of the Notes.
In Moody's opinion though, this restructuring of the trust will
be, in this instance, rating positive since:
(i) any potential implication resulting from the impact of the recent
UK High Court judgment in BNP Corporate Trustee Services Ltd v Eurosail
UK 2007-3BL PLC on balance sheet insolvency of the issuer (see
Moody's press release of 19 August 2010) will be resolved.
This follows as there will be no notes in Funding 2, and the notes
remaining in Funding 1 following the October IPD will now have the benefit
both of the redemption reserve and a 7% reserve fund. As
a result of these two features, Moody's has assessed the likelihood
of balance sheet insolvency will be reduced to a similar level to the
probability of default on the Aaa rated notes.
(ii) cash collateralisation of the Funding 1 notes via the redemption
reserve reduces the risk of back ended losses as these notes will be less
likely to extend past their scheduled repayment date.
(iii) the seller share is projected to increase from 33.8%
pre the restructuring to 52.3% post the restructuring.
The loans which are being repurchased have been selected at random and
the characteristics of the pool remain similar following the loan repurchase.
The expected portfolio loss of 1.0% of original balance
at closing remains unchanged whilst the MILAN Aaa required Credit Enhancement
of 9.6% represents a small increase over the previous figure
of 9.4%. The key drivers for the MILAN Aaa Credit
Enhancement number, which is in line with other prime UK RMBS Master
Trust transactions, are the weighted average loan-to-value
(LTV) of 66.4%, the average seasoning of over three
years, and three month arrears of 1.63%.
Following the restructuring the outstanding notes in the trust will consist
of Holmes Financing (No 10) Series 4 Notes and Holmes Master Issuer 2006-1
Series 3 Notes which are scheduled to repay in October 2010, Holmes
Master Issuer 2007-1 Series 3 and Series 4 Notes which are scheduled
to repay in January 2011 to October 2012 and Holmes Master Issuer 2007-2
Series 3 and Series 4 Notes which are scheduled to repay in April 2011
to October 2011.
Today's update relates to the current restructuring of the trust only
and should not be taken to imply that Moody's will not take a rating action
in respect of the securities by virtue of any other events or circumstances
that may be occurring now or that occur in the future. The last
rating action on any notes issued out of the Holmes Master Trust was in
December 2008, when initial ratings were assigned to the Series
The principal methodologies used in rating and monitoring the transaction
are "Moody's Updated Methodology for Rating UK RMBS" published in October
2009 and " Moody's RMBS Master Trust Cash Flow Analysis" published
in April 2008, which can be found at 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 issue 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.
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 transaction. Other risks have not been
addressed, but may have a significant effect on yield to investors.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
MD - Structured Finance
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
Moody's updates on the Holmes UK RMBS Master Trust
One Canada Square
London E14 5FA
No Related Data.
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