Barclays PLC BARC

PRESS RELEASE: S&P Takes Rtg Actions In Eurosail-UK 2007-1NC And 2007-2NP

 
 
The following is a press release from Standard & Poor's: 
 
OVERVIEW 
 
     -- We have carried out a credit and cash flow analysis in line with our 
December 2011 U.K. RMBS criteria. 
     -- We have resolved the CreditWatch placements and taken various rating 
actions on all rated classes of notes in the Eurosail-UK 2007-1NC and 
Eurosail-UK 2007-2NP transactions. 
     -- Eurosail-UK 2007-1NC and 2007-2NP are backed by nonconforming U.K. 
residential mortgages. 
 
LONDON (Standard & Poor's) May 28, 2012--Standard & Poor's Ratings Services 
today took various credit rating actions on Eurosail-UK 2007-1NC PLC and 
Eurosail-UK 2007-2NP PLC's U.K. residential mortgage-backed securities (RMBS) 
notes (see list below). 
 
Today's rating actions follow our credit and cash flow analysis of the most 
recent transaction information that we have received (dated March 2012). Our 
analysis reflects our December 2011 U.K. RMBS criteria (see "U.K. RMBS 
Methodology And Assumptions," published on Dec. 9, 2011). In addition, we have 
applied our 2010 counterparty criteria for the transaction counterparties (see 
"Counterparty And Supporting Obligations Methodology And Assumptions," 
published on Dec. 6, 2010). 
 
On Dec. 12, 2011, we placed our ratings on all classes of notes in Eurosail-UK 
2007-1NC and Eurosail-UK 2007-2NP on CreditWatch negative following the 
publication of our December 2011 U.K. RMBS criteria (see "Ratings On 764 
Tranches In 119 U.K. RMBS Transactions Placed On CreditWatch Negative After 
U.K. RMBS Criteria Update"). 
 
EUROSAIL-UK 2007-1NC 
 
Credit enhancement has been increasing across all classes of notes due to the 
deleveraging of the transaction, and as of March 2012, the reserve fund has 
been replenished to its target level and excess spread has begun to build up. 
Total arrears reached a peak in March 2009 at 49%, and since then have 
remained relatively flat. However, we have projected arrears in our analysis, 
due to an upward trend in 120+ day arrears and repossessions in each of the 
past two quarters. 
 
We have today removed from CreditWatch negative our ratings on all classes of 
notes in Eurosail-UK 2007-1NC. 
 
We have affirmed our 'AA-' (sf) rating on the class A3 notes, which is capped 
at the level of the issuer credit rating (ICR) on Barclays Bank PLC 
(A+/Stable/A-1) plus one notch, due to the currency swap agreement failing to 
comply with our 2010 counterparty criteria. 
 
We have also affirmed our ratings on the class B1 and C1 notes at 'BBB (sf)' 
and 'BB (sf)' respectively, and lowered our rating on the class D1 notes to 
'B- (sf)'. 
 
We have raised our rating on the class DTc excess spread notes to 'BBB (sf)'; 
we expect these notes to pay down in the short-term, as the current 
outstanding balance is GBP1.25 million. This rating action also considers the 
potential levels of excess spread available to pay down the class DTc notes in 
future periods, following the replenishment of the reserve fund to its target 
level as of March 2012. 
 
We have raised our ratings on the class E1 and ETc notes to 'B- (sf)' from 'D 
(sf)', as we do not expect these notes to default in the short term, and 
accounting for the fact that the reserve fund is at its target level. 
 
We have affirmed our 'CCC (sf)' rating on the deferrable-interest FTc notes. 
 
 
Eurosail-UK 2007-1NC is backed by nonconforming U.K. residential mortgages 
originated by Preferred Mortgages Ltd., Southern Pacific Personal Loans Ltd., 
Matlock Bank Ltd., Southern Pacific Mortgages Ltd., and Langersal No. 2 Ltd. 
 
 
EUROSAIL-UK 2007-2NP 
 
On Oct. 28, 2011, we raised our rating on the cross currency swap 
counterparty, Swiss Re, to 'AA-/Stable/A-1+' from 'A+/Positive/A-1'. However, 
as the swap documentation is not compliant with our 2010 counterparty 
criteria, the maximum achievable rating for all classes of notes in this 
transaction is equal to the ICR on Swiss Re plus one notch. Therefore, we have 
raised our ratings on the class A2a, A2c, A3a, A3c, M1a, and M1c notes to  'AA 
(sf)'. 
 
We have applied our December 2011 U.K. RMBS criteria for this transaction, and 
this has resulted in the required credit enhancement levels increasing for 
each rating level. This increase in required credit coverage, along with our 
updated recession timing assumptions, has led us to lower our ratings on the 
class C1a, D1a, D1c, and E1c notes. 
 
The arrears performance for this transaction has been close to the level of 
the U.K. RMBS nonconforming index. Total arrears reached a peak in June 2009 
at 26.20%, and have since decreased slightly and flattened. However, in the 
first quarter of 2012, there was an increase in total arrears to 24.98%, from 
23.43% in December 2011, and we have therefore increased our forecasted 
arrears assumptions as part of our analysis. 
 
The reserve fund has so far been drawn twice, most recently in September 2009 
and previously in December 2008. From late 2008 and throughout 2009, a large 
amount of losses were realized, and this contributed to the draws on the 
reserve fund. Cumulative losses have since slowed down and are currently at 
3.03%, although they are still increasing slightly. The reserve fund is 
currently fully funded, and excess spread has been about 1% per year since 
March 2010. 
 
For both transactions, the documented required short-term rating for a bank 
account provider is 'A-1+'. We understand that the relevant transaction 
parties are in the final stages of taking remedial action, following the 
downgrade of Barclays Bank PLC to 'A-1'. Failure to remedy the downgrade of 
Barclays could result in future rating action. 
 
 
Eurosail-UK 2007-2NP is backed by nonconforming U.K. residential mortgages 
originated by Preferred Mortgages Ltd., Matlock Bank Ltd., Southern Pacific 
Mortgages Ltd., and GMAC Residential Funding Co. Ltd. 
 
CREDIT STABILITY 
 
Our credit stability analysis indicates that the maximum projected 
deterioration that we would expect at each rating level for time horizons of 
one year and three years, under moderate stress conditions, are in line with 
our credit stability criteria (see "Methodology: Credit Stability Criteria," 
published on May 3, 2010). 
 
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT 
 
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating 
relating to an asset-backed security as defined in the Rule, to include a 
description of the representations, warranties and enforcement mechanisms 
available to investors and a description of how they differ from the 
representations, warranties and enforcement mechanisms in issuances of similar 
securities. The Rule applies to in-scope securities initially rated (including 
preliminary ratings) on or after Sept. 26, 2011. 
 
If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this 
credit rating report are available at 
http://standardandpoorsdisclosure-17g7.com. 
 
RELATED CRITERIA AND RESEARCH 
 
     -- U.K. Nonconforming RMBS Index Report Q1 2012: Low Interest Rates Keep 
Defaults At Bay As The Economy Contracts, May 9, 2012 
     -- European Structured Finance Scenario And Sensitivity Analysis: The 
Effects Of The Top Five Macroeconomic Factors, March 14, 2012 
     -- Ratings On 764 Tranches In 119 U.K. RMBS Transactions Placed On 
CreditWatch Negative After U.K. RMBS Criteria Update, Dec. 12, 2011 
     -- U.K. RMBS Methodology And Assumptions, Dec. 9, 2011 
     -- Global Structured Finance Scenario And Sensitivity Analysis: The 
Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011 
     -- Swiss Reinsurance Co. Ltd. And Core Subs Upgraded To 'AA-' On Very 
Strong Competitive Position; Outlook Stable, Oct. 28, 2011 
     -- Counterparty And Supporting Obligations Update, Jan. 13, 2011 
     -- Counterparty And Supporting Obligations Methodology And Assumptions, 
Dec. 6, 2010 
     -- Methodology: Credit Stability Criteria, May 3, 2010 
     -- Danske Bank A/S Downgraded To 'A+/A-1' On Domestic And Irish Asset 
Quality Concerns; Outlook Negative, Feb. 5, 2009 
 
RATINGS LIST 
 
Class                Rating 
           To                     From 
 
Eurosail-UK 2007-1NC PLC 
EUR552.15 Million, GBP357.3 Million Mortgage-Backed Floating-Rate Notes, 
Excess-Spread-Backed Floating-Rate Notes 
 
 
Rating Raised And Removed From CreditWatch Negative 
 
DTc        BBB (sf)               B (sf)/Watch Neg 
 
Ratings Raised 
 
E1c        B- (sf)                D (sf) 
ETc        B- (sf)                D (sf) 
 
Ratings Affirmed And Removed From CreditWatch Negative 
 
A3a        AA- (sf)               AA- (sf)/Watch Neg 
A3c        AA- (sf)               AA- (sf)/Watch Neg 
B1a        BBB (sf)               BBB (sf)/Watch Neg 
B1c        BBB (sf)               BBB (sf)/Watch Neg 
C1a        BB (sf)                BB (sf)/Watch Neg 
 
Rating Affirmed 
 
FTc        CCC (sf)               CCC (sf) 
 
Ratings Lowered And Removed From CreditWatch Negative 
 
D1a        B- (sf)                B (sf)/Watch Neg 
D1c        B- (sf)                B (sf)/Watch Neg 
 
 
Eurosail-UK 2007-2NP PLC 
EUR480.7 Million, GBP267.575 Million Mortgage-Backed Floating-Rate Notes And An 
Overissuance Excess Spread Backed Floating-Rate Notes 
 
Ratings Raised And Removed From CreditWatch Negative 
 
A2a        AA (sf)                AA- (sf)/Watch Neg 
A2c        AA (sf)                AA- (sf)/Watch Neg 
A3a        AA (sf)                AA- (sf)/Watch Neg 
A3c        AA (sf)                AA- (sf)/Watch Neg 
M1a        AA (sf)                AA- (sf)/Watch Neg 
M1c        AA (sf)                AA- (sf)/Watch Neg 
 
Ratings Affirmed And Removed From CreditWatch Negative 
 
B1a        A+ (sf)                A+ (sf)/Watch Neg 
B1c        A+ (sf)                A+ (sf)/Watch Neg 
 
Ratings Lowered And Removed From CreditWatch Negative 
 
C1a        BBB (sf)               A- (sf)/Watch Neg 

D1a        B (sf)                 B+ (sf)/Watch Neg 
D1c        B (sf)                 B+ (sf)/Watch Neg 
E1c        B- (sf)                B (sf)/Watch Neg 
 
NR--Not rated. 
 
Surveillance Credit Analyst: Elton Eakins, London (44) 20-7176-3698; 
                             elton_eakins@standardandpoors.com 
Additional Contact: Structured Finance Europe; 
                    StructuredFinanceEurope@standardandpoors.com 
 
 
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(END) Dow Jones Newswires

May 28, 2012 08:21 ET (12:21 GMT)