Bradford & Bingley's proposal for restructuring its Aire Valley RMBS master trust has prompted mixed reaction from two rating agencies.
The nationalized U.K. bank has proposed to repurchase £4 billion ($6.52B) of assets, redeem the Aire Valley 2007-2 and 2008-1 bonds, and replace £280 million of the reserve fund with a subordinated loan.
Credit enhancement for the class A, B, and C notes in the 2004-1, 2005-1, 2006-1, and 2007-1 transactions will increase as a result of the restructuring to 28.4%, 19.9%, and 10.7%, respectively. These amounts were 23.6%, 17.9%, and 8.9%, respectively before the proposed restructuring.
The available credit enhancement for the class D notes in the 2004-1 transaction will also increase to 9.9% from 5.4% before the proposed restructuring.
Moody’s Investors Service reacted favorably; on Monday it placed the notes under review for potential upgrade. The rating agency said that the changes would be credit positive for the transactions.
Standard & Poor’s was less enthused. It said the restructuring won't boost credit enhancement enough to boost ratings. In a report published Monday, the rating agency said the “master trust's proposed restructuring and the proposed amendments made to the transaction documents will not, in and of itself, result in a change to, withdrawal of, or qualification of our respective ratings in each transaction.”
Aire Valley securitized self-certified and buy-to-let U.K. mortgages originated by Bradford & Bingley. The lender, which took a hit during the financial crisis, was nationalized in 2008.
Moody’s list the deals that would be impacted below:
Issuer: Aire Valley Mortgages 2004-1 plc
....25M Series 3 B2 Notes, Aa2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to Aa2 (sf)
....£20M Series 3 C1 Notes, A2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to A2 (sf)
....31M Series 3 C2 Notes, A2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to A2 (sf)
....£15M Series 3 D1 Notes, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to Baa2 (sf)
....22M Series 3 D2 Notes, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to Baa2 (sf)
Issuer: Aire Valley Mortgages 2005-1, plc
....23M Series 2 B2 Notes, Aa2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to Aa2 (sf)
....41.8M Series 2 C2 Notes, A2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to A2 (sf)
Issuer: Aire Valley Mortgages 2006-1 plc
....US$70M Series 1 B1 Notes, Aa2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to Aa2 (sf)
Issuer: Aire Valley Mortgages 2007-1 plc
....£62.5M Series 1 C Notes, A2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to A2 (sf)
....£81.25M Series 2 C Notes, A2 (sf) Placed Under Review for Possible Upgrade; previously on Feb 18, 2014 Upgraded to A2 (sf)
