London, 15 May 2015 -- Moody's Investors Service has today upgraded the ratings of seven notes
and affirmed the ratings of two notes in three Irish residential mortgage-backed
securities (RMBS) transactions: Fastnet Securities 2 Plc,
Fastnet Securities 6 Ltd and Fastnet Securities 10 Limited.
Today's rating actions follow the upgrade of Permanent tsb p.l.c.'s
deposit rating to B1 from B3 and the assignment of its Counterparty Risk
Assessment ("CR Assesment") at Ba3(cr) (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_324253).
Please refer to the end of the Ratings Rationale section for a list of
affected ratings.
RATINGS RATIONALE
Today's rating upgrades reflect the upgrade of Permanent tsb p.l.c.'s
deposit rating to B1 from B3 and the assignment of its CR Assessment at
Ba3(cr). Permanent tsb p.l.c. acts as the
servicer and cash manager in all three transactions and also acts as the
account bank and the swap provider in Fastnet Securities 2 Plc.
Today's affirmations reflect Moody's view that the available credit
enhancement is sufficient to maintain the current rating on the affected
notes at the Irish country ceiling i.e. Aa1.
-- COUNTERPARTY RISK EXPOSURE AND UPDATES TO MOODY'S
STRUCTURE FINANCE RATING METHODOLOGIES
Today's rating actions took into consideration the notes'
exposure to relevant counterparties, such as servicer, account
banks or swap providers. Moody's incorporated the updates
to its structured finance methodologies in its analysis of the transactions
affected by today's rating actions (see "Moody's updates several
structured finance rating methodologies in light of its new counterparty
risk assessment for banks", published on 16 March 2015).
Moody's now matches banks' exposure in structured finance
transactions to the CR Assessment for commingling risk, and to the
bank deposit rating when analyzing set-off risk. Moody's
has introduced a recovery rate assumption of 45% for both exposures.
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 or cash mangers.
Moody's also assessed the default probability of each transaction's
account bank providers by referencing the bank's deposit rating.
As a result of this the potential upgrade of the rating of class A2 in
Fastnet Securities 2 Plc was constrained at the Baa3 (sf) level.
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.
-- KEY COLLATERAL ASSUMPTIONS
The key collateral assumptions for Fastnet Securities 2 Plc, Fastnet
Securities 6 Ltd and Fastnet Securities 10 Limited remain unchanged as
part of this review. The performance of the underlying asset portfolios
remain in line with Moody's assumptions. Moody's also has
a stable outlook (http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF373727)
for Irish RMBS transactions.
Moody's quantitative analysis incorporates the ratings' sensitivity
to increases in key collateral assumptions. The increases included
stresses between 1.25x and 1.50x of the current EL assumption
and 1.2x MILAN CE. Moody's sensitivity analysis would
typically expect to see the ratings fall by no more than one to three
notches using these stressed assumptions. The results of this analysis
limited the potential upgrade of the ratings on the Class A2 and A3 in
Fastnet Securities 6 Ltd and Class A3 notes in Fastnet Securities 10 Limited.
Principal Methodology:
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework", published in January
2015. Please see the Credit Policy 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) further decrease in sovereign risk; (2) better-than-expected
performance of the underlying collateral; (3) deleveraging of the
capital structure; and (4) improvements in the credit quality of
the transaction counterparties
Factors or circumstances that could lead to a downgrade of the ratings
include (1) an increase in sovereign risk; (2) worse-than-expected
performance of the underlying collateral; (3) deterioration in the
notes' available credit enhancement; and (4) deterioration in the
credit quality of the transaction counterparties.
LIST OF AFFECTED RATINGS
Issuer: Fastnet Securities 2 Plc
....EUR1656M A2 Notes, Upgraded to Baa3
(sf); previously on Jul 24, 2014 Upgraded to Ba1 (sf)
....EUR50M B Notes, Upgraded to Ba2
(sf); previously on Jul 24, 2014 Upgraded to B3 (sf)
....EUR44M C Notes, Upgraded to B2 (sf);
previously on Jul 24, 2014 Upgraded to Caa1 (sf)
....EUR56M D Notes, Upgraded to Caa2
(sf); previously on Jul 24, 2014 Confirmed at Ca (sf)
Issuer: Fastnet Securities 6 Ltd
....EUR559.2M A2 Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 Upgraded to Aa3 (sf)
....EUR559.2M A3 Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 Upgraded to Aa3 (sf)
Issuer: Fastnet Securities 10 Limited
....EUR828.8M A1 Notes, Affirmed
Aa1 (sf); previously on Jan 23, 2015 Upgraded to Aa1 (sf)
....EUR414.4M A2 Notes, Affirmed
Aa1 (sf); previously on Jan 23, 2015 Upgraded to Aa1 (sf)
....EUR310.8M A3 Notes, Upgraded
to Aa3 (sf); previously on Jan 23, 2015 Upgraded to A1 (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.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of these transactions
in the past six months.
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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
Ali Khan
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
Masako Oshima
Senior Vice President
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades seven notes in three Fastnet transactions