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Rating Action:

Moody's upgrades 12 notes and affirms 14 notes in 4 UK non-conforming RMBS

12 Nov 2015

London, 12 November 2015 -- Moody's Investors Service, ("Moody's") has today affirmed the ratings of 14 notes and upgraded the ratings of 12 notes in 4 UK non-conforming residential mortgage-backed securities (RMBS) transactions: Clavis Securities plc: Series 2006-01 (Clavis 06-1), Residential Mortgage Securities 21 Plc (RMS 21), RMAC 2004-NS3 PLC and RMAC 2004-NSP4 PLC.

The rating upgrades reflect the better than expected collateral performance and the increased levels of credit enhancement for the affected notes.

Moody's affirmed the ratings of the notes that had sufficient credit enhancement to maintain current ratings .

Today's rating actions conclude the placement on review for upgrade of 12 notes placed on review for upgrade on the October 14 2015 rating action (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 is prompted by (1) the improvement of key collateral assumptions and reduced uncertainty of this seasoned portfolio, and (2) deal deleveraging resulting in an increase in credit enhancement for the affected notes.

--- 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 the transactions has improved since 2012. Total delinquencies have decreased in the past year, with 90 days + arrears currently standing below 4% for Clavis 06-1, 18% for RMS 21, 7% for RMAC 2004-NS3 PLC and 6% for RMAC 2004-NSP4 PLC.

Moody's has decreased its expected loss assumptions to 1.0% of the original pool balance (OB), down from 1.1% for Clavis 06-1, to 5.5% from 5.8% for RMS 21, to 0.76% from 0.80% for RMAC 2004-NS3 PLC, and to 1.1% from 1.2% for RMAC 2004-NSP4 PLC. Moody's maintained its MILAN CE assumptions at 18.8%, 28.0%, 15.5% and 14.15% in Clavis 06-1, RMS 21, RMAC 2004-NS3 PLC and RMAC 2004-NSP4 PLC respectively.

The Expected Loss and the MILAN CE are two key parameters used by Moody's to calibrate the loss distribution curve, which is one of the inputs into the residential mortgages backed securities cash-flow model. As part of its analysis, Moody's took into consideration different scenarios of amortization schedule and lower portfolio yield for RMAC 2004-NS3 PLC and RMAC 2004-NSP4 PLC deals.

--- INCREASE IN CREDIT ENHANCEMENT

Deal deleveraging resulted in an increase in credit enhancement for all affected notes. For instance, the credit enhancement for the most senior tranche affected by today's rating action increased over the past year to 31% from 30% in Clavis 06-1, to 77% from 76% in RMS 21, to 37% from 36% in RMAC 2004-NS3 PLC, and to 40% from 39% in RMAC 2004-NSP4 PLC.

--- COUNTERPARTY EXPOSURE

Today's rating actions took into consideration the notes' exposure to relevant counterparties, such as servicer, account banks or swap providers.

Moody's considered how the liquidity available in the transactions and other mitigants support continuity of note payments, in case of servicer default, using the CR Assessment as a reference point for servicers. All 4 transactions benefit from a back-up servicer but no independent cash manager. As a result, Moody's considered that the back-up servicing arrangements are insufficient to support payments in the event of servicer disruption. Moody's also believes that this risk is further exacerbated for those transactions where the senior notes are denominated in another currency and exposed to a FX swap. A failure to provide the swap counterparties with timely information, in particular in regards to the principal payments could lead to a termination event under the swap documentation. Therefore, senior notes exposed to an FX swap are capped at Aa2 (sf) in consideration of this additional risk, compared to a Aa1 (sf) cap for senior notes not exposed to an FX swap. Senior notes in RMS 21 are exposed to an FX swap but benefit from sufficient credit enhancement to mitigate the severity of possible losses from a swap termination event. As a result, Moody's capped the rating of the senior notes in RMS 21 at Aa1 (sf).

Moody's assessed the exposure to Barclay's Bank Plc acting as the swap counterparty in Clavis 06-1, RMAC 2004-NS3 PLC and RMS 21. Moody's analysis considered the risks of additional losses on the notes if they were to become unhedged following default of the swap counterparty by using the CR Assessment as reference point for swap counterparties. Moody's concluded that the ratings of the notes M1a, M1b and M2a of Clavis 06-1, the notes B1a and B1c of RMS 21 and the notes M1 and M2 of RMAC 2004-NS3 PLC are constrained by the swap exposure.

Principal Methodology:

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.

List of Affected Ratings:

Issuer: Clavis Securities 2006-01

....GBP125M A3a Notes, Affirmed Aa2 (sf); previously on Jan 30, 2012 Downgraded to Aa2 (sf)

....EUR181.95M A3b Notes, Affirmed Aa2 (sf); previously on Jan 30, 2012 Downgraded to Aa2 (sf)

....GBP2M B1a Notes, Upgraded to A3 (sf); previously on Oct 14, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade

....EUR16.8M B1b Notes, Upgraded to A3 (sf); previously on Oct 14, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade

....GBP8.1M B2a Notes, Upgraded to Baa3 (sf); previously on Oct 14, 2015 Ba1 (sf) Placed Under Review for Possible Upgrade

....GBP12.25M M1a Notes, Affirmed Aa3 (sf); previously on Jun 15, 2006 Definitive Rating Assigned Aa3 (sf)

....EUR45M M1b Notes, Affirmed Aa3 (sf); previously on Jun 15, 2006 Assigned Aa3 (sf)

....GBP24M M2a Notes, Upgraded to A1 (sf); previously on Oct 14, 2015 A3 (sf) Placed Under Review for Possible Upgrade

Issuer: Residential Mortgage Securities 21 Plc

....GBP150M A3a Notes, Affirmed Aa1 (sf); previously on Jul 28, 2014 Upgraded to Aa1 (sf)

....EUR254M A3c Notes, Affirmed Aa1 (sf); previously on Jul 28, 2014 Upgraded to Aa1 (sf)

....GBP11M B1a Notes, Upgraded to Aa3 (sf); previously on Oct 14, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade

....EUR23.4M B1c Notes, Upgraded to Aa3 (sf); previously on Oct 14, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade

....GBP18M B2a Notes, Upgraded to Baa1 (sf); previously on Oct 14, 2015 B2 (sf) Placed Under Review for Possible Upgrade

....GBP26.5M M1a Notes, Affirmed Aa1 (sf); previously on Jul 28, 2014 Upgraded to Aa1 (sf)

....EUR36.2M M1c Notes, Affirmed Aa1 (sf); previously on Jul 28, 2014 Upgraded to Aa1 (sf)

....GBP16.4M M2a Notes, Affirmed Aa2 (sf); previously on Jul 28, 2014 Upgraded to Aa2 (sf)

....EUR19.5M M2c Notes, Affirmed Aa2 (sf); previously on Jul 28, 2014 Upgraded to Aa2 (sf)

Issuer: RMAC 2004-NS3 PLC

....GBP170M A2a Notes, Affirmed Aa2 (sf); previously on Jul 20, 2011 Downgraded to Aa2 (sf)

....EUR168M A2c Notes, Affirmed Aa2 (sf); previously on Jul 20, 2011 Downgraded to Aa2 (sf)

....GBP7.5M B Notes, Upgraded to A2 (sf); previously on Oct 14, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade

....GBP22.5M M1 Notes, Affirmed Aa3 (sf); previously on Sep 30, 2004 Definitive Rating Assigned Aa3 (sf)

....GBP20M M2 Notes, Upgraded to Aa3 (sf); previously on Oct 14, 2015 A3 (sf) Placed Under Review for Possible Upgrade

Issuer: RMAC 2004-NSP4 PLC

....GBP595M A2 Notes, Affirmed Aa1 (sf); previously on Jul 20, 2011 Downgraded to Aa1 (sf)

....GBP12M B1 Notes, Upgraded to A1 (sf); previously on Oct 14, 2015 Baa2 (sf) Placed Under Review for Possible Upgrade

....GBP40M M1 Notes, Upgraded to Aa1 (sf); previously on Oct 14, 2015 Aa3 (sf) Placed Under Review for Possible Upgrade

....GBP32M M2 Notes, Upgraded to Aa1 (sf); previously on Oct 14, 2015 A2 (sf) Placed Under Review for Possible Upgrade

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Christophe Larpin
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
SUBSCRIBERS: 44 20 7772 5454

Carole Bernard
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454

Moody's upgrades 12 notes and affirms 14 notes in 4 UK non-conforming RMBS
No Related Data.
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