Frankfurt am Main, November 25, 2019 -- Moody's Investors Service ("Moody's") has today
upgraded the ratings of two classes of Notes and affirmed the rating of
one class of Notes issued by KION Mortgage Finance plc. The rating
action reflects the increase in the levels of credit enhancement for the
affected classes of Notes, as well as better than expected collateral
performance.
....EUR 553.8M Class A Notes,
Affirmed Baa1 (sf); previously on March 7, 2019 Upgraded to
Baa1 (sf)
....EUR 28.2M Class B Notes,
Upgraded to Baa2 (sf); previously on March 7, 2019 Upgraded
to Ba1 (sf)
....EUR 18.0M Class C Notes,
Upgraded to Ba2 (sf); previously on March 7, 2019 Upgraded
to Ba3 (sf)
RATINGS RATIONALE
The rating action is prompted by:
-deal deleveraging resulting in an increase in credit enhancement
for the affected Notes.
-decreased key collateral assumptions, namely the portfolio
Expected Loss (EL) assumption due to better than expected collateral performance.
Moody's affirmed the rating of the Notes that had sufficient credit
enhancement to maintain their current rating.
Increase in Available Credit Enhancement
Sequential amortization and a non-amortising reserve fund has led
to the increase in the credit enhancement available in this transaction.
Since the last rating action in March 2019, CE supporting the Class
B and C Notes increased to 57.4% from 38.6%,
and to 42.4% from 28.5%, respectively.
The large build-up of CE over this short period of time is driven
by the fact that between July and September 2019 the seller repurchased
all loans more than 30 days in arrears from the pool, amounting
to €8.4 million, or 24% of the total pool balance
prior to the repurchase.
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.
Prior to the repurchase of all loans more than 30 days in arrears,
the performance of the transaction had been stable since the last rating
action. Currently no loans are more than 30 days in arrears,
and cumulative defaults stand at 1.48% of original pool
balance, and have not increased since the last rating action.
Moody's decreased the expected loss assumption to 1.90%
as a percentage of original pool balance from 2.06% due
to the stable performance prior to the repurchase, and the improved
arrears profile of the pool remaining after the repurchase.
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 maintained the MILAN CE assumption
at 30%.
Today's rating action 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. The rating of the Notes are at this point not constrained
by operational risk.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in July 2019.
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;
(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, 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.
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.
Yuval Toledano
Associate Lead Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Michelangelo Margaria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
