S&P: CreditWatch Placements Resolved In Five U. K. RMBS Transactions; Other Ratings Raised
Specifically, we have raised and removed from CreditWatch positive our ratings on:
Gemgarto 2012-1 PLC's class A1, M1, and M2 notes;Money Partners Securities 1 PLC's class M1, M2a, and M2b notes;Residential Mortgage Securities 23 PLC's class A notes;Residential Mortgage Securities 25 PLC's class A1, A2, M1-Dfrd, and M2-Dfrd notes; andResidential Mortgage Securities 26 PLC's class A1, M1, and M2 notes. We have raised our ratings on:
Gemgarto 2012-1's class B1 and B2 notes;Money Partners Securities 1's class B1 notes;Residential Mortgage Securities 25's class B1-Dfrd, B2-Dfrd, and B3-Dfrd notes; andResidential Mortgage Securities 26's B1 and B2 notes (see list below).On June 22, 2016, we placed on CreditWatch positive our ratings on the abovementioned classes of notes following the replacement of the transaction account and guaranteed investment contract (GIC) provider in each of the transactions (Barclays Bank PLC) with HSBC Bank PLC (AA-/Negative/A-1+) (see "Ratings On 14 Tranches In Five U. K. RMBS Transactions Placed On CreditWatch Positive"). In light of this change, our current counterparty criteria no longer constrain the maximum potential rating in these transactions (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013). Barclays Bank remains in each of the transactions as the collection account bank provider and the documented replacement trigger for this role has been lowered in accordance with our current counterparty criteria.
Residential Mortgage Securities 23 and Money Partners Securities 1 benefit from a liquidity facility provided by Barclays Bank, which, following a breach of the documented replacement trigger, has been drawn to cash and deposited with HSBC Bank.
Given the recent counterparty amendments, we have conducted a full review of each transaction in order to resolve the CreditWatch placements.
In terms of performance, each of these transactions has been improving over the past two years, with 90+ days delinquencies in the worst performing of the five transactions (Money Partners Securities 1) decreasing to 14.7% in Q2 2016 from 19.9% in Q1 2015. This, coupled with the increased seasoning, has resulted in lower weighted-average foreclosure frequency (WAFF) assumptions since our previous full reviews of each transaction (see "Related Research").
Since the most recent full review of each transaction, credit enhancement for each class of notes has increased. This is due to each transaction having a fully funded non-amortizing reserve fund (except for Residential Mortgage Securities 25, which could amortize if certain performance conditions are met) and a sequential payment structure (except for Money Partners Securities 1 which is amortizing pro rata).
Our analysis indicates that all classes of notes in each of the five transactions can pass our cash flow stresses at higher rating levels than those currently assigned. We have therefore raised our ratings on all classes of notes listed below and have resolved our June 22, 2016 CreditWatch placements.
Our credit stability analysis indicates that the maximum projected deterioration that we would expect at each rating level for the one - and three-year horizons, under moderate stress conditions, is in line with our credit stability criteria (see "Methodology: Credit Stability Criteria," published on May 3, 2010).