Moody's also affirms the ratings of 6 notes
London, 27 September 2017 -- Moody's Investors Service ("Moody's") has today upgraded the ratings of
4 notes and affirmed the ratings of 6 notes in three Portuguese RMBS transactions,
i.e. Azor Mortgages Public Limited Company, Lusitano
Mortgages No. 6 Designated Activity Company ("Lusitano Mortgages
No. 6 DAC") and Magellan Mortgages No. 1 plc. The
rating action reflects:
- better than expected collateral performance for Azor Mortgages
Public Limited Company and Magellan Mortgages No. 1 plc.
- the increased levels of credit enhancement for Lusitano Mortgages
No. 6 DAC.
Moody's affirmed the ratings of the notes that had sufficient credit enhancement
to maintain current rating on the affected notes.
Please note that Lusitano Mortgages No. 6 DAC was previously Lusitano
Mortgages No. 6 Limited, before the conversion to a Designated
Activity Company on the 17th of September 2016.
Issuer: Azor Mortgages Public Limited Company
....EUR 253M Class A Notes, Affirmed
A1 (sf); previously on Dec 21, 2016 Affirmed A1 (sf)
....EUR 19M Class B Notes, Affirmed
A1 (sf); previously on Dec 21, 2016 Affirmed A1 (sf)
....EUR 9M Class C Notes, Upgraded to
A2 (sf); previously on Dec 21, 2016 Upgraded to A3 (sf)
Issuer: Lusitano Mortgages No. 6 Designated Activity Company
....EUR 943.25M Class A Notes,
Affirmed A1 (sf); previously on Jul 16, 2015 Upgraded to A1
(sf)
....EUR 65.45M Class B Notes,
Upgraded to Baa1 (sf); previously on Jul 16, 2015 Upgraded
to Baa3 (sf)
....EUR 41.8M Class C Notes,
Upgraded to Ba3 (sf); previously on Jul 16, 2015 Upgraded to
B3 (sf)
....EUR 17.6M Class D Notes,
Affirmed Caa3 (sf); previously on Jul 16, 2015 Affirmed Caa3
(sf)
Issuer: Magellan Mortgages No. 1 plc
....EUR 942.5M Class A Notes,
Affirmed A1 (sf); previously on May 6, 2016 Affirmed A1 (sf)
....EUR 37M Class B Notes, Affirmed
A1 (sf); previously on May 6, 2016 Upgraded to A1 (sf)
....EUR 20.5M Class C Notes,
Upgraded to A2 (sf); previously on Jul 27, 2017 Upgraded to
Baa1 (sf)
RATINGS RATIONALE
The rating action is prompted by:
- decreased key collateral assumptions, namely the portfolio
Expected Loss (EL) and Milan assumptions due to better than expected collateral
performance for Azor Mortgages Public Limited Company and, portfolio
EL for Magellan Mortgages No. 1 plc.
- deal deleveraging resulting in an increase in credit enhancement
for Lusitano Mortgages No. 6 DAC.
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 Azor Mortgages Public Limited Company has continued
to improve since last year. Total delinquencies have decreased,
with 90 days plus arrears currently standing at 0.26% of
current pool balance from 1.31% last year.
The performance of Magellan Mortgages No. 1 plc has continued to
improve since last year. Total delinquencies have decreased,
with 90 days plus arrears currently standing at 0.56% of
current pool balance from 0.67% last year.
Moody's decreased the expected loss assumption for Azor Mortgages Public
Limited Company and Magellan Mortgages No. 1 plc to 1.34%
and 0.60% respectively, as a percentage of original
pool balance, from 1.80% and 0.69% respectively,
due to the improving performance.
The expected loss assumption of Lusitano Mortgages No. 6 DAC remains
unchanged.
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.
As a result, Moody's has decreased the portfolio credit Milan
CE assumption of Azor Mortgages Public Limited Company to 11.5%
from 12.4%.
The MILAN CE of Lusitano Mortgages No. 6 DAC and Magellan Mortgages
No. 1 plc remains unchanged.
Increase in Available Credit Enhancement:
Sequential amortization and trapping of excess spread led to the increase
in the credit enhancement available in Lusitano Mortgages No. 6
DAC.
For instance, the credit enhancement for the tranche B and C affected
by today's rating action increased from 12.5% and
5.4% to 14.0% and 6.2% respectively
since last year. The amount of principal deficiency for this transaction
has now decreased to EUR 15.8 million from EUR 18.1 million
last year.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in September 2017.
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 these
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) deleveraging of the capital structure and
(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 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.
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.
Lam Tran Ngoc
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
Masako Oshima
Associate Managing Director
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
