The U.K. RMBS pipeline added a £680 million ($1.06 billion) transaction that is backed by a pool of prime U.K. residential mortgage loans originated by the former Britannia Building Society and the Co-operative Bank plc.

Silk Road Finance Number Three PLC, is the third RMBS transaction that the Co-operative Bank has issued containing Britannia prime mortgage loans.

Moody's Investors Service has assigned the class A notes issued under the structure , a provisional credit ratings of 'Aaa'. The rating agency has not rated the class B1, class B2 or class C notes.

The Co-operative Bank will act as servicer and cash manager in the transaction.  The bank is currently rated 'A3' /' P-2'.  According to a Moody's presale report on the deal, the deal is structured with a  non-amortizing, reserve fund that will be funded to 2.5% of the pool balance . The total credit enhancement for the Class A notes will be 16.75%.

Moody's currently rates the Co-operative bank  at 'A3' /' P-2'.  There is a back up servicer facilitator and a back-up cash manager facilitator in place at closing, triggers to appoint back up servicer and cash manager should the rating of Co-operative Bank fall below 'Baa3'.

Fitch Ratings did not rate the RMBS deal but today the rating agency announced that it downgraded Co-operative Bank's long-term issuer default rating (IDR) to 'BBB+' from 'A-' and its viability rating  to 'bbb+' from 'a-'.  

The downgrades reflect an increase in impaired loans at the Co-operative Bank, which account for  9.1% of gross loans at end-2011.

Fitch said in a report today, that the asset deterioration has been mostly driven "by a worsening of exposures to the commercial and residential investment property sectors. " The ratings agency said it expected further deterioration in 2012.



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