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Tudor Rose Mortgages 2021-1 PLC U.K. RMBS Ratings Raised On Five Classes Of Notes; Class A Rating Affirmed


  • 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 (%)
AAA 24.96 50.08 12.50
AA 17.75 41.45 7.36
A 14.06 27.86 3.92
BBB 10.55 19.34 2.04
BB 6.85 13.15 0.90
B 6.02 7.85 0.47
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.

Related Criteria

Related Research

Primary Credit Analyst:Arnaud Checconi, London + 44 20 7176 3410;
Research Contributor:Kayur M Chheda, Mumbai;

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