- Following our review of Tudor Rose Mortgages 2021-1 PLC, we raised our ratings on the class B-Dfrd, C-Dfrd, D-Dfrd, RFN-Dfrd, and X1-Dfrd notes.
- At the same time, we affirmed our rating on the class A notes.
- The transaction is backed by a pool of buy-to-let mortgage loans secured on properties in England and Wales.
LONDON (S&P Global Ratings) Jan. 26, 2023--S&P Global Ratings today raised its credit ratings on Tudor Rose Mortgages 2021-1 PLC's class B-Dfrd notes to 'AA+ (sf)' from 'AA (sf)', C-Dfrd notes to 'AA (sf)' from 'A+ (sf)', D-Dfrd notes to 'A (sf)' from 'BBB (sf)', RFN-Dfrd notes to 'B+ (sf)' from 'B (sf)', and X1-Dfrd notes to 'BBB+ (sf)' from 'BB (sf)'. At the same time, we affirmed our 'AAA (sf)' rating on the class A notes.
The transaction is backed by a pool of buy-to-let (BTL) mortgage loans secured on properties in England and Wales.
Today's rating actions reflect the decline of the required credit coverage at all rating levels since closing. The transaction has been amortizing sequentially. Both liquidity and non-liquidity reserve funds are at target.
Since our last review, our weighted-average foreclosure frequency (WAFF) assumptions have decreased at all rating levels for higher stress levels, primarily thanks to higher seasoning and a lower effective loan-to-value (LTV) ratio. The lower weighted-average indexed current LTV ratio decreases our WAFF assumptions, as the effective LTV ratio applied is calculated with a weighting of 80% of the original LTV ratio and 20% of the current LTV ratio.
This lower weighted-average current LTV ratio and repossession market value declines have also reduced our weighted-average loss severity (WALS) assumptions.
|Weighted-Average Foreclosure Frequency And Weighted-Average Loss Severity|
|WAFF (%)||WALS (%)||CC (%)|
|WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity. CC--Credit coverage.|
Loan-level arrears have increased to 3.8% from 2.3--slightly above our BTL index (see "European RMBS Index Report Q3 2022," published on Nov. 7, 2022). No cumulative losses have been recorded so far. Notably, severe arrears (more than 120 days) have risen. The servicer confirmed it is currently reviewing the severe arrears cases, which are at varying stages of the repossession process: from the fixed charge receiver being appointed to the sale being agreed but delayed.
In addition to the standard runs, we also performed some sensitivity runs using a longer recovery period, and higher prepayment and delinquency rates, given volatile and rising interest rates and the uncertain economic outlook. Our credit and cash flow results indicate that the available credit enhancement for the class A notes continues to be commensurate with the assigned rating. We therefore affirmed our 'AAA (sf)' rating on this class of notes.
The class B-Dfrd, C-Drfd, D-Dfrd, and RFN-Dfrd notes could withstand our stresses at higher rating levels than those assigned. However, the ratings were constrained by additional factors. First, we considered their sensitivity to higher delinquencies given the challenging economic environment. In addition, we took into account these classes' relative position in the capital structure and their lower credit enhancement compared with that of the senior notes. The RFN notes have no credit enhancement. Our rating on the class X1-Dfrd notes also reflects their sensitivity to a very high prepayment scenario, that they are not asset-backed, and the presence of a turbo mechanism post the notes' step-up date. We therefore raised our ratings on these classes of notes.
There are no counterparty constraints on the ratings. The replacement language in the documentation is in line with our counterparty criteria (see "Related Criteria").
We expect U.K. inflation to remain high in 2023. Although high inflation is overall credit negative for all borrowers, inevitably some borrowers will be more negatively affected than others and to the extent inflationary pressures materialize more quickly or more severely than currently expected, risks may emerge. This transaction is a BTL transaction and although underlying tenants may be affected by inflationary pressures, the borrowers in the pool are generally considered to be professional landlords and will benefit from diversification of properties and rental streams. Borrowers in this transaction are largely paying a fixed rate of interest on average until 2025. As a result, in the short to medium term borrowers are protected from rate rises but will feel the effect of rising cost of living pressures. Our credit and cash flow analysis and related assumptions consider the transaction's ability to withstand the potential repercussions of the current economic environment--including higher inflation and an increase in the cost of living--such as higher defaults and longer recovery timing due to a potential backlog in court cases.
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct. 18, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- General Criteria: Methodology Applied To Bank Branch-Supported Transactions, Oct. 14, 2013
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009
- Economic Research: European Housing Prices: A Sticky, Gradual Decline, Jan. 11, 2023
- EMEA Structured Finance Chart Book: December 2022, Dec. 8, 2022
- Credit Conditions Europe Q1 2023: Time To Face The Music, Dec. 1, 2022
- Economic Outlook U.K. Q1 2023: A Moderate Yet Painful Recession, Nov. 29, 2022
- European RMBS Index Report Q3 2022, Nov. 7, 2022
- Cost Of Living Crisis: Mapping Exposures In European RMBS And Covered Bond Markets, June 27, 2022
- European RMBS Market Update Q1 2022: Challenges And Opportunities From Rising Interest Rates, June 1, 2022
- Cost Of Living Crisis: How Bad Could It Get For U.K. RMBS, May 20, 2022
- Residential Mortgage Market Outlooks Maintained For 15 European Jurisdictions Following Revised Economic Forecasts, April 28, 2022
- ESG Industry Report Card: Residential Mortgage-Backed Securities, March 31, 2021
- 2017 EMEA RMBS Scenario And Sensitivity Analysis, July 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
|Primary Credit Analyst:||Arnaud Checconi, London + 44 20 7176 3410;|
|Research Contributor:||Kayur M Chheda, Mumbai;|
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.