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Rating Action:

Moody's upgrades ratings in 3 UK non-conforming RMBS transactions

15 Jun 2022

London, June 15, 2022 -- Moody's Investors Service ("Moody's") has today upgraded the ratings of 26 notes in Great Hall Mortgages No. 1 Plc Series 2006-01, Great Hall Mortgages No. 1 Plc Series 2007-01 and Great Hall Mortgages No. 1 Plc Series 2007-02. The rating action reflects the upgrade of The Co-operative Bank plc (The Co-operative Bank)'s Counterparty Risk assessment ("CR assessment") to Baa3(cr) acting as master servicer, 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 their current ratings.

Issuer: Great Hall Mortgages No. 1 Plc Series 2006-01

....GBP216.3M Class A2a Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....EUR175M Class A2b Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP25.8M Class Ba Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....EUR7.5M Class Bb Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP11.5M Class Ca Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....EUR8M Class Cb Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP6M Class Da Notes, Upgraded to Aa1 (sf); previously on Oct 25, 2021 Upgraded to Aa3 (sf)

....EUR11.5M Class Db Notes, Upgraded to Aa1 (sf); previously on Oct 25, 2021 Upgraded to Aa3 (sf)

....GBP5.6M Class Ea Notes, Upgraded to Baa3 (sf); previously on Oct 25, 2021 Affirmed Ba1 (sf)

Issuer: Great Hall Mortgages No. 1 Plc Series 2007-01

....GBP264M Class A2a Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....EUR396M Class A2b Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP47.1M Class Ba Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....EUR55.6M Class Bb Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP14M Class Ca Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....EUR33.4M Class Cb Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP19M Class Da Notes, Upgraded to Aa2 (sf); previously on Oct 25, 2021 Upgraded to A1 (sf)

....EUR22.9M Class Db Notes, Upgraded to Aa2 (sf); previously on Oct 25, 2021 Upgraded to A1 (sf)

....GBP14.5M Class Ea Notes, Upgraded to Ba2 (sf); previously on Oct 25, 2021 Upgraded to B1 (sf)

Issuer: Great Hall Mortgages No. 1 Plc Series 2007-02

....GBP278.8M Class Aa Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....EUR30M Class Ab Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....US$600M Class Ac Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP75.2M Class Ba Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Affirmed Aa3 (sf)

....GBP9M Class Ca Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Upgraded to Aa3 (sf)

....EUR42.1M Class Cb Notes, Upgraded to Aaa (sf); previously on Oct 25, 2021 Upgraded to Aa3 (sf)

....GBP2M Class Da Notes, Upgraded to A2 (sf); previously on Oct 25, 2021 Upgraded to A3 (sf)

....EUR28M Class Db Notes, Upgraded to A2 (sf); previously on Oct 25, 2021 Upgraded to A3 (sf)

....GBP7.5M Class Ea Notes, Affirmed B3 (sf); previously on Oct 25, 2021 Affirmed B3 (sf)

....EUR10M Class Eb Notes, Affirmed B3 (sf); previously on Oct 25, 2021 Affirmed B3 (sf)

RATINGS RATIONALE

The rating action is prompted by the upgrade of The Co-operative Bank's CR assessment to Baa3(cr), who acts as master servicer in the transactions. Link to counterparty's rating action https://ratings.moodys.com/ratings-news/388817. The rating action also reflects the decreased key collateral assumptions, namely the portfolio Expected Loss (EL) for Great Hall Mortgages No. 1 Plc Series 2006-01 and, for all three transactions, the MILAN CE assumptions due to better than expected collateral performance, as well as an increase in credit enhancement for the affected tranches.

Revision of Key Collateral Assumptions:

As part of the rating action, Moody's reassessed its lifetime loss expectation for the portfolios reflecting the collateral performance to date.

The performance of Great Hall Mortgages No. 1 Plc Series 2006-01 has been better than expected since October 2021. Total delinquencies have decreased since then, with 90 days plus arrears currently standing at 2.8% of current pool balance, with pool factor at 20%. Cumulative losses have remained stable at 1.65% of original pool balance.

Moody's assumed the expected loss assumption of 2.50% as a percentage of current pool balance. This corresponds to 2.15% as a percentage of original pool balance, down from the previous assumption of 2.27%.

The performance of Great Hall Mortgages No. 1 Plc Series 2007-01 and Great Hall Mortgages No. 1 Plc Series 2007-02 has been stable since October 2021. 90 days plus arrears as a percentage of current balance are currently standing at 4.6% and 5.4%, respectively, with pool factor at 29% and 32%. Cumulative losses have remained stable at 2.5% and 2.7% of original pool balance, respectively.

Moody's maintained the expected loss assumption as a percentage of original pool balance for Great Hall Mortgages No. 1 Plc Series 2007-01 and Great Hall Mortgages No. 1 Plc Series 2007-02 at 3.29% and 3.75%, respectively.

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 MILAN CE assumptions for Great Hall Mortgages No. 1 Plc Series 2006-01, Great Hall Mortgages No. 1 Plc Series 2007-01 and Great Hall Mortgages No. 1 Plc Series 2007-02 to 14%, 16% and 16% from 16%, 20% and 20%, respectively.

Increase in Available Credit Enhancement

The three transactions are amortising sequentially as performance triggers have been breached and are incurable, which means their notes' payment waterfalls cannot revert to pro-rata amortisation. Sequential amortization and non-amortizing reserve funds led to the increase in the credit enhancement available in the transactions.

For instance, in Great Hall Mortgages No. 1 Plc Series 2006-01, the credit enhancement for tranches Da and Db affected by today's rating action increased to 11.45% from 10.95% since the last rating action in October 2021.

In Great Hall Mortgages No. 1 Plc Series 2007-01, the credit enhancement for tranches Da and Db affected by today's rating action increased to 11.29% from 10.61% since the last rating action in October 2021.

In Great Hall Mortgages No. 1 Plc Series 2007-02, the credit enhancement for tranches Da and Db affected by today's rating action increased to 9.82% from 9.18% since the last rating action in October 2021.

Counterparty Exposure

Today's rating actions took into consideration the notes' exposure to relevant counterparties, such as servicers.

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. The CR assessment of The Co-operative Bank who acts as master servicer in the three transactions has been upgraded to Baa3(cr) on 31 May 2022. As a result, the ratings are not constrained by financial disruption risk anymore. However, due to the transactions' weak back-up servicing arrangements the notes' ratings will remain linked to the credit quality of the master servicer.

Moody's also considered that several amendments have been implemented in the three transactions. Under the amendments, the Issuer has (a) updated the reference rate of notes denominated in GBP to compounded daily SONIA instead of 3 month sterling LIBOR; (b) updated the reference rate in respect of the LIBOR Hedge Agreement and the GBP leg of the Currency Hedge Agreement to compounded daily SONIA; (c) incorporated a spread adjustment that reflects the difference between LIBOR and the new reference rate; (d) changed the reference rate used to calculate the interest rate charged on loans linked to sterling LIBOR in the portfolios to Synthetic LIBOR. Moody's notes there is no fall back language for USD LIBOR in Great Hall Mortgages No. 1 Plc Series 2007-02, and therefore the transaction is exposed to risks arising from the cessation of USD LIBOR.

The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in February 2022 and available at https://ratings.moodys.com/api/rmc-documents/378445. Alternatively, please see the Rating Methodologies page on https://ratings.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 and (3) 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, (4) deterioration in the credit quality of the transaction counterparties and (5) no fallback rate for USD LIBOR in Great Hall Mortgages No. 1 Plc Series 2007-02 when USD LIBOR will be unavailable after 30 June 2023.

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 on https://ratings.moodys.com/rating-definitions.

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 issuer/deal page for the respective issuer on https://ratings.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 https://ratings.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 https://ratings.moodys.com/documents/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 https://ratings.moodys.com.

Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Yunkun Zhang
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

No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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