London, 21 December 2016 -- Moody's Investors Service has today upgraded the ratings of 7 notes in
5 Portuguese RMBS. The rating action reflects:
- 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 rating on the affected notes.
Please refer to the end of the Ratings Rationale section for a list of
affected ratings.
RATINGS RATIONALE
The rating action is prompted by:
- deal deleveraging resulting in an increase in credit enhancement
for the affected tranches
Increase in Available Credit Enhancement
Sequential amortization and non-amortising reserve funds and /or
trapping of excess spread led to the increase in the credit enhancement
available in these transactions.
Moody's assessed the exposure to Banco Santander S.A.
(Spain) and The Royal Bank of Scotland plc acting as swap counterparties,
respectively for HIPOTOTTA NO. 1 PLC and Magellan Mortgages No.
2 plc . Moody's analysis considered the risks of additional losses
on the notes if they were to become unhedged following a swap counterparty
default by using the CR Assessment as reference point for swap counterparties.
Moody's concluded that the ratings of the C notes of both transactions
are constrained by the swap agreement entered between the issuer and Banco
Santander S.A. (Spain) and The Royal Bank of Scotland plc,
respectively for HIPOTOTTA NO. 1 PLC and Magellan Mortgages No.
2 plc .
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in September 2016.
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) 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.
LIST OF AFFECTED RATINGS:
Issuer: Azor Mortgages Public Limited Company
....EUR253M A Notes, Affirmed A1 (sf);
previously on Jan 28, 2016 Affirmed A1 (sf)
....EUR19M B Notes, Affirmed A1 (sf);
previously on Jan 28, 2016 Affirmed A1 (sf)
....EUR9M C Notes, Upgraded to A3 (sf);
previously on Jan 28, 2016 Upgraded to Baa1 (sf)
Issuer: HIPOTOTTA NO. 1 PLC
....EUR1053.2M A Notes, Affirmed
A1 (sf); previously on May 6, 2016 Affirmed A1 (sf)
....EUR32.5M B Notes, Affirmed
A1 (sf); previously on May 6, 2016 Upgraded to A1 (sf)
....EUR14.3M C Notes, Upgraded
to A3 (sf); previously on May 6, 2016 Affirmed Baa1 (sf)
Issuer: Lusitano Mortgages No. 1 plc
....EUR915M A Notes, Affirmed A1 (sf);
previously on May 6, 2016 Affirmed A1 (sf)
....EUR32.5M B Notes, Affirmed
A1 (sf); previously on May 6, 2016 Affirmed A1 (sf)
....EUR25M C Notes, Upgraded to A1 (sf);
previously on May 6, 2016 Upgraded to Baa1 (sf)
....EUR22.5M D Notes, Upgraded
to Ba2 (sf); previously on May 6, 2016 Upgraded to Ba3 (sf)
....EUR5M E Notes, Affirmed Caa1 (sf);
previously on May 6, 2016 Affirmed Caa1 (sf)
Issuer: Lusitano Mortgages No. 4 plc
....EUR1134M A Notes, Affirmed A1 (sf);
previously on Jul 16, 2015 Upgraded to A1 (sf)
....EUR22.8M B Notes, Upgraded
to Baa3 (sf); previously on Jul 16, 2015 Upgraded to Ba1 (sf)
....EUR19.2M C Notes, Upgraded
to B2 (sf); previously on Jul 16, 2015 Upgraded to B3 (sf)
....EUR24M D Notes, Affirmed Caa3 (sf);
previously on Jul 16, 2015 Affirmed Caa3 (sf)
Issuer: Magellan Mortgages No. 2 plc
....EUR930M A Notes, Affirmed A1 (sf);
previously on Nov 27, 2015 Affirmed A1 (sf)
....EUR40M B Notes, Affirmed A1 (sf);
previously on Nov 27, 2015 Affirmed A1 (sf)
....EUR25M C Notes, Upgraded to A3 (sf);
previously on Nov 27, 2015 Upgraded to Baa1 (sf)
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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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
Associate 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
Michelangelo Margaria
Senior Vice President/Manager
Structured Finance Group
Telephone:+39-02-9148-1100
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