Ratings Raised On Southern Pacific Financing 05-B's U.K. RMBS Notes Following Review
OVERVIEW
- On Nov. 10, 2017, we placed on CreditWatch positive our ratings on Southern Pacific Financing 05-B's class A, B, and C notes following our upgrade of Barclays Bank, the transaction account provider.
- Following our credit and cash flow analysis review, we have raised and removed from CreditWatch positive our ratings on the class A, B, and C notes.
- At the same time, we have raised our ratings on the class D and E notes.
- Southern Pacific Financing 05-B securitizes nonconforming U.K. residential mortgages, which Southern Pacific Mortgages originated.
LONDON (S&P Global Ratings) Dec. 5, 2017--S&P Global Ratings today raised and removed from CreditWatch positive its credit ratings on Southern Pacific Financing 05-B PLC's class A, B, and C notes. At the same time, we have raised our ratings on the class D and E notes (see list below). Today's rating actions follow our credit and cash flow analysis of the transaction, as part of our periodic review of its performance as of the September 2017 payment date, and the application of our relevant criteria (see "Related Criteria"). On Oct. 17, 2017, we raised our long- and short-term issuer credit ratings (ICRs) on Barclays Bank PLC, the collection account provider in this transaction (see "Prospective Barclays Ring-Fenced Entity Assigned Preliminary 'A/A-1' Ratings, Barclays Bank PLC Raised To 'A/A-1'"). Consequently, on Nov. 10, 2017, we placed on CreditWatch positive our ratings on the class A, B, and C notes (see "Various Rating Actions Taken On 161 Tranches In 46 European RMBS Transactions After Barclays Bank Upgrade"). The transaction benefits from a £4.6 million nonamortizing reserve fund (at target) and an amortizing liquidity facility (£8.1 million). The transaction pays principal sequentially because the 90+ days arrears trigger of 22.5% remains breached (the reported level is 30.6%, based on amounts outstanding). In the December 2012 investor report, the servicer (Acenden Ltd.) updated how it reports arrears to include amounts outstanding, delinquencies, and other amounts owed. The servicer's definition of other amounts owed include (among other items), arrears of fees, charges, costs, ground rent, and insurance. Delinquencies include principal and interest arrears on the mortgages, based on the borrowers' monthly installments. Amounts outstanding are principal and interest arrears, after payments from borrowers are first allocated to other amounts owed. In this transaction, the servicer first allocates any arrears payments to other amounts owed, then to interest amounts, and subsequently to principal. From a borrowers' perspective, the servicer first allocates any arrears payments to interest and principal amounts, and secondly to other amounts owed. This difference in the servicer's allocation of payments for the transaction and the borrower results in amounts outstanding being greater than delinquencies. We have refined our analysis of these other amounts owed by using the available reported loan-level data. The new approach results in a minor increase in the weighted-average foreclosure frequency (WAFF) and a decrease in the weighted-average loss severity (WALS). Total delinquencies were reported as 14.1% on the September 2017 payment date, compared with 15.2% in December 2016. Our expectation of potential future defaults has decreased, given the loans are well seasoned and arrears are stable. Rating WAFF WALS level (%) (%) AAA 29.74 34.20 AA 24.15 26.70 A 20.06 15.12 BBB 16.13 8.72 BB 12.29 4.76 B 10.85 3.05 Our current counterparty criteria cap the maximum achievable ratings in this transaction at our long-term 'A' issuer credit rating on Barclays Bank PLC as the account provider (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013, and "Prospective Barclays Ring-Fenced Entity Assigned Preliminary 'A/A-1' Ratings, Barclays Bank PLC Raised To 'A/A-1'," published on Oct. 17, 2017). Therefore, following our recent upgrade of Barclays Bank, we have raised to 'A (sf)' from 'A- (sf)' and removed from CreditWatch positive our ratings on the class A, B, and C notes. Without this cap, the class A, B, and C notes pass our cash flow stresses at a 'AAA' rating level. Following the decrease in our WAFF and WALS assumptions and based on the results of our cash flow analysis, we have raised to 'A- (sf)' from 'BBB- (sf)' our rating on the class D notes and to 'BB+ (sf)' from 'B (sf)' our rating on the class E notes. Southern Pacific Financing 05-B is backed by nonconforming U.K. residential mortgage loans, which Southern Pacific Mortgages Ltd. originated.
RELATED CRITERIA
- Criteria - Structured Finance - General: Methodology And Assumptions: Assessing Pools Of European Residential Loans, Aug. 4, 2017
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016
- Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015
- Criteria - Structured Finance - General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- Criteria - Structured Finance - General: Counterparty Risk Framework Methodology And Assumptions, June 25, 2013
- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- General Criteria: Methodology: Credit Stability Criteria, May 3, 2010
- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009
- Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009
RELATED RESEARCH
- U.K. RMBS Index Report Q3 2017, Nov. 22, 2017
- Various Rating Actions Taken On 161 Tranches In 46 European RMBS Transactions After Barclays Bank Upgrade, Nov. 10, 2017
- Ratings On The United Kingdom Affirmed At 'AA/A-1+'; Outlook Remains Negative, Oct. 27, 2017
- Prospective Barclays Ring-Fenced Entity Assigned Preliminary 'A/A-1' Ratings, Barclays Bank PLC Raised To 'A/A-1', Oct. 17, 2017
- Outlook Assumptions For the U.K. Residential Mortgage Market, Aug. 21, 2017
- Low Borrowing Rates Are Still Fueling Europe's Housing Market Recovery, Aug. 1, 2017
- 2017 EMEA RMBS Scenario And Sensitivity Analysis, July 6, 2017
- Europe Displays Financial Calm, But What About The Brexit And QE Clouds Ahead?, June 30, 2017"
- Europe's Recovery Is On Track, But Not Without Risks Of Derailment Or Disruption, March 31, 2017
- Various Rating Actions Taken On Southern Pacific Financing 05-B's U.K. RMBS Notes Following Review, March 8, 2017
- European Economic Snapshots: Resilience Despite Political Risk, Feb. 28, 2017
- Servicer Evaluation: Acenden Ltd., Jan. 6, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
RATINGS LIST
Class Rating
To From
Southern Pacific Financing 05-B PLC
£480 Million Mortgage-Backed Floating-Rate Notes
Ratings Raised And Removed From CreditWatch Positive
A A (sf) A- (sf)/Watch Pos
B A (sf) A- (sf)/Watch Pos
C A (sf) A- (sf)/Watch Pos
Ratings Raised
D A- (sf) BBB- (sf)
E BB+ (sf) B (sf)
| Primary Credit Analyst: | Arnaud Checconi, London (44) 20-7176-3410; ChecconiA@spglobal.com |
| Secondary Contact: | Giovanna Perotti, Milan +390272111209; Giovanna.Perotti@spglobal.com |
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