(The following statement was released by the rating agency)
Nov 23 - Fitch Ratings has assigned Lannraig Master Issuer plc's Series 2012-1 notes final ratings, as follows:
GBP715,000,000 class A: assigned 'AAAsf'; Outlook Stable;
GBP55,000,000 class Z: 'NRsf'
The final ratings are based on Fitch's assessment of the underlying collateral, available credit enhancement (CE), Clydesdale Bank plc's (Clydesdale; 'A'/Stable/'F1') origination and underwriting procedures, its servicing capabilities, and the transaction's legal structure. CE for the class A notes will initially total 15.35%, which will be provided by the subordination of the unrated class Z notes of 13.78% as well as an initial reserve fund of 1.57% (GBP24.3m).
The notes are backed by buy-to-let (BTL) mortgage loans originated in the UK by Clydesdale and Yorkshire Bank Home Loans Limited (YBHL), which are subsidiaries of the National Australia Bank Limited (NAB; 'AA-'/Stable/'F1+'). The notes are the second issuance from the Lannraig Master Issuer plc. Funding allows for de-linked issuance from the Lannraig master trust programme. A de-linked structure allows series of notes with different ratings and maturities to be issued on an individual basis at different times, subject to the fulfilment of certain issuance tests.
To analyse CE levels, Fitch evaluated the collateral using its default model, details of which can be found in the reports entitled 'EMEA Residential Mortgage Loss Criteria' dated 7 June 2012 and 'EMEA Criteria Addendum - United Kingdom - Mortgage Loss and Cashflow Assumptions', dated 9 August 2012 both of which are available at www.fitchratings.com.
The agency modelled the transaction cash flows using default and loss severity assumptions indicated by the default model under various recession timings, prepayment speeds, interest rates and originator default scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by legal final maturity.
Clydesdale provided Fitch with a loan-by-loan data template. Clydesdale was, however, not able to provide the year of construction for the loans in the portfolio. In the absence of this data, Fitch assumed that 25% of the portfolio was secured by new build properties and applied a 5% haircut to the property valuation. In addition, the Quick Sale Adjustment (QSA) calculated using the repossession data provided by Clydesdale, was higher than the Fitch criteria assumption of 22%. Fitch increased its QSA assumption for Lannraig to 40%, which is lower than the observed QSA calculated from the repossession data. The data contained only 11 repossessions, and was deemed too small to be considered a reliable estimate of future QSA levels. Furthermore, the average QSA derived by the repossession file is materially impacted by the default of one particular borrower with a large number of loans.
Details of model-implied ratings sensitivity to changes in underlying defaults and loss severity will be included in the new issue report, which will shortly be available at www.fitchratings.com.
At closing, Fitch also affirmed the ratings of the outstanding notes from the prior issuance under the Lannraig Master Issuer, as detailed below:
Lannraig Master Issuer plc - Series 2011-1
Class 1A: affirmed at 'AAAsf'; Outlook Stable
(Bangalore Ratings Team, Hotline: +91 80 4135 5898 Debanjali.Ghosh@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Debanjali.Ghosh.firstname.lastname@example.org)
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