London, 20 October 2021 -- Moody's Investors Service, ("Moody's") has today upgraded the ratings
of four notes in Polaris 2019-1 plc and six notes in Polaris 2020-1
plc. The rating action reflects the increased levels of credit
enhancement for the affected notes, and better than expected collateral
performance.
Moody's affirmed the ratings of the notes that had sufficient credit enhancement
to maintain their current ratings.
Issuer: Polaris 2019-1 plc
....GBP218.86M Class A Notes,
Affirmed Aaa (sf); previously on Jul 27, 2020 Affirmed Aaa
(sf)
....GBP11.87M Class B Notes,
Affirmed Aa2 (sf); previously on Jul 27, 2020 Affirmed Aa2
(sf)
....GBP11.87M Class C Notes,
Upgraded to Aa2 (sf); previously on Jul 27, 2020 Affirmed A1
(sf)
....GBP6.59M Class D Notes, Upgraded
to Aa3 (sf); previously on Jul 27, 2020 Affirmed A3 (sf)
....GBP5.27M Class E Notes, Upgraded
to Baa1 (sf); previously on Jul 27, 2020 Downgraded to Ba1
(sf)
....GBP2.64M Class F Notes, Upgraded
to Ba3 (sf); previously on Jul 27, 2020 Downgraded to B2 (sf)
Issuer: Polaris 2020-1 plc
....GBP294.55M Class A Notes,
Affirmed Aaa (sf); previously on Aug 6, 2020 Definitive Rating
Assigned Aaa (sf)
....GBP21.16M Class B Notes,
Upgraded to Aa2 (sf); previously on Aug 6, 2020 Definitive
Rating Assigned Aa3 (sf)
....GBP12.35M Class C Notes,
Upgraded to Aa3 (sf); previously on Aug 6, 2020 Definitive
Rating Assigned A2 (sf)
....GBP7.05M Class D Notes, Upgraded
to Baa2 (sf); previously on Aug 6, 2020 Definitive Rating Assigned
Baa3 (sf)
....GBP5.29M Class E Notes, Upgraded
to Ba2 (sf); previously on Aug 6, 2020 Definitive Rating Assigned
Ba3 (sf)
....GBP3.53M Class F Notes, Upgraded
to B2 (sf); previously on Aug 6, 2020 Definitive Rating Assigned
B3 (sf)
....GBP9.7M Class X Notes, Upgraded
to Ba1 (sf); previously on Aug 6, 2020 Definitive Rating Assigned
Caa3 (sf)
The two transactions are static cash securitisations of non-conforming
owner-occupied and buy-to-let mortgage loans extended
to obligors living in the UK having a relatively high exposure to self-employed
borrowers, and to borrowers having some adverse credit characteristics
at the time of origination. Both transactions have a sequential
structure, and significant levels of excess spread but do not have
any credit reserve fund.
RATINGS RATIONALE
The rating action is prompted by an increase in credit enhancement for
the affected tranches, as well as decreased key collateral assumptions,
namely the portfolio Expected Loss (EL) in both transactions and,
in Polaris 2020-1 plc, the MILAN CE assumption due to better
than expected collateral performance.
Increase in Available Credit Enhancement
Sequential amortisation led to the increase in the credit enhancement
available in both transactions.
The credit enhancement for Classes B, C, D, E and F
in Polaris 2019-1 plc increased to 23.1%, 14.8%,
10.2%, 6.5% and 4.6% from
14.9%, 9.5%, 6.6%,
4.2% and 3.0%, respectively since the
last rating action in July 2020.
The credit enhancement for Classes B, C, D, E and F
in Polaris 2020-1 plc increased to 11.7%, 7.8%,
5.6%, 3.9% and 2.8% from
10.5%, 7.0%, 5.0%,
3.5% and 2.5%, respectively since closing
in August 2020.
Revision of Key Collateral Assumptions:
As part of the rating action, Moody's reassessed its lifetime loss
expectation for the portfolio reflecting the collateral performance to
date.
The performance of Polaris 2019-1 plc and Polaris 2020-1
plc has been better than expected. Arrears greater than 90 days
as a percentage of current balance are currently standing at 2.4%
and 1.2% respectively, with a pool factor at 54.1%
and 90.1% respectively. Cumulative losses in both
transactions stand at 0%. Furthermore, the phasing
out of coronavirus-related forbearance measures has not translated
into materially worsened collateral performance in both transactions.
Both transactions have moderate weighted average current loan-to-indexed-values
of 60.0% and 64.7% in Polaris 2019-1
plc and Polaris 2020-1 plc, respectively, which will
support future performance.
Moody's assumed an expected loss of 3.48% and 3.84%
on current pool balance for Polaris 2019-1 plc and Polaris 2020-1
plc, respectively, due to better than expected collateral
performance. This corresponds to an expected loss assumption as
a percentage of the original pool balance of 1.88% and 3.60%
for Polaris 2019-1 plc and Polaris 2020-1 plc, respectively,
down from the previous assumptions of 3.50% and 4.00%.
Moody's has also assessed loan-by-loan information
as a part of its detailed transaction review to determine the credit support
consistent with target rating levels and the volatility of future losses.
Based on the assessment of the current composition of the pool Moody's
has decreased the MILAN CE assumption for Polaris 2020-1 plc to
15% from 16%. The MILAN CE assumption for Polaris
2019-1 plc remained unchanged at 15%.
Moody's also considered how the liquidity available in the transactions
supports the ratings of the notes. Both transactions benefit from
amortising liquidity reserve funds, which provide liquidity for
the Class A notes of each deal only. Additionally in Polaris 2020-1
plc, there is an amortising payment holiday reserve which serves
to enhance the revenue receipts of that transaction. The released
amounts of the reserves form part of each issuer's available revenue
funds. Apart from the aforementioned released amounts, the
junior notes of both transactions do not benefit from any credit reserve
and rely on the principal to pay interest mechanism, which is in
itself limited in certain circumstances, to support timely payments
of interest. As such, Moody's has applied a financial
disruption risk cap to the Class B and Class C Notes in Polaris 2019-1
plc and to the Class B Notes in Polaris 2020-1 plc at Aa2 (sf).
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in December 2020 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1248130.
Alternatively, 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 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 is better
than Moody's expected; (2) an increase in available credit enhancement;
(3) improvements in the credit quality of the transaction counterparties;
and (4) a decrease in sovereign risk.
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 in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
Lisa Macedo
Vice President - Senior Analyst
Structured Finance Group
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
Gaby Trinkaus, CFA
VP - Senior Credit Officer
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
