London, 05 November 2021 -- Moody's Investors Service ("Moody's") has today upgraded the ratings of
two notes in ResLoC UK 2007-1 PLC and two notes in RMAC No.
1 PLC. The rating action reflects the increased levels of credit
enhancement for the affected notes in both transactions, and,
in the case of ResLoC UK 2007-1 PLC better than expected collateral
performance.
Moody's affirmed the ratings of the notes that had sufficient credit enhancement
to maintain their current ratings.
Issuer: ResLoC UK 2007-1 PLC
....EUR197.3M Class A3a Notes,
Affirmed Aa1 (sf); previously on Jul 27, 2017 Upgraded to Aa1
(sf)
....GBP203.1M Class A3b Notes,
Affirmed Aa1 (sf); previously on Jul 27, 2017 Upgraded to Aa1
(sf)
....US$150M Class A3c Notes,
Affirmed Aa1 (sf); previously on Jul 27, 2017 Upgraded to Aa1
(sf)
....EUR23.6M Class M1a Notes,
Upgraded to Aa1 (sf); previously on Jan 31, 2014 Confirmed
at Aa2 (sf)
....GBP64.8M Class M1b Notes,
Upgraded to Aa1 (sf); previously on Jan 31, 2014 Confirmed
at Aa2 (sf)
Issuer: RMAC No. 1 PLC
....GBP351.7M Class A Notes,
Affirmed Aaa (sf); previously on Jul 27, 2020 Affirmed Aaa
(sf)
....GBP11.9M Class B Notes, Upgraded
to Aa1 (sf); previously on Jul 27, 2020 Affirmed Aa2 (sf)
....GBP11.9M Class C Notes, Upgraded
to A1 (sf); previously on Jul 27, 2020 Confirmed at A2 (sf)
....GBP8M Class D Notes, Affirmed Baa2
(sf); previously on Jul 27, 2020 Confirmed at Baa2 (sf)
The two transactions are static cash securitisations of non-conforming
residential mortgages extended to obligors located in the UK, mainly
originated prior to 2008, with a high exposure to interest only
loans and with some adverse credit at closing.
In ResLoC UK 2007-1 PLC the principal payments waterfall can switch
between pro-rata and sequential amortization subject to pre-defined
conditions being met and the notes are currently amortising pro-rata.
In RMAC No. 1 PLC the notes amortize sequentially at all times.
RATINGS RATIONALE
The rating action is prompted by an increase in credit enhancement for
the affected tranches in both transactions, as well as decreased
key collateral assumptions, namely the portfolio Expected Loss (EL)
and the MILAN CE, in ResLoC UK 2007-1 PLC due to better than
expected collateral performance. The ratings of the notes issued
by ResLoC UK 2007-1 PLC are constrained by financial disruption
risk.
Increase in Available Credit Enhancement
The notes' amortisation combined with a fully funded reserve fund,
which is non amortising in the case of ResLoC UK 2007-1 PLC and
gradually increasing in the case of RMAC No.1 PLC, led to
the increase in the credit enhancement available in both transactions.
The credit enhancement for pari passu ranking Classes M1a and M1b in ResLoC
UK 2007-1 PLC upgraded in today's rating action increased to 27.9%
from 25.1% since the last rating action in January 2014.
The credit enhancement for Classes B and C in RMAC No. 1 PLC increased
to 14.5% and 10.1% from 12.7%
and 8.9% respectively since the last rating action in July
2020.
Key Collateral Assumptions
As part of the rating action, Moody's reassessed its lifetime loss
expectation reflecting the collateral performance to date.
The performance of ResLoC UK 2007-1 PLC has been better than expected.
Arrears greater than 90 days as a percentage of current pool balance are
currently standing at 4.44% with a pool factor at 25.6%.
Cumulative losses in ResLoC UK 2007-1 PLC stand at 3.45%
as a proportion of original pool balance.
Moody's assumed an expected loss of 2.85% on current balance
for ResLoC UK 2007-1 PLC, due to better than expected collateral
performance. This corresponds to an expected loss assumption as
a percentage of the original pool balance of 4.2% down from
the previous assumption of 5.4%.
Moody's assumed an expected loss of 4.88% on current pool
balance for RMAC No. 1 PLC which corresponds to an unchanged expected
loss assumption as a percentage of the original pool balance of 3.5%.
Furthermore, the phasing out of coronavirus-related forbearance
measures has not translated into materially worsened collateral performance
in the above transactions.
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 pools backing
the two transactions, Moody's has maintained the MILAN CE assumption
for RMAC No. 1 PLC and reduced the MILAN CE in ResLoC UK 2007-1
PLC to 14% from 22%.
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. In ResLoC UK 2007-1 PLC, the ratings of
the notes are constrained by operational risk at Aa1 (sf), due to
the lack of the cash manager's explicit permission to estimate cashflows
and thereby to continue to calculate note payments during a servicing
disruption event.
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: (i) performance of the underlying collateral that is better
than Moody's expected; (ii) an increase in available credit enhancement;
(iii) improvements in the credit quality of the transaction counterparties;
and (iv) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the ratings
include: (i) an increase in sovereign risk; (ii) performance
of the underlying collateral that is worse than Moody's expected;
(iii) deterioration in the notes' available credit enhancement; and
(iv) 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
