DBRS Ratings Limited Assigns Rating to Glacier Securities Limited-Series 2010-2

DBRS Ratings Limited (DBRS) has today assigned ratings to certain of the notes issued under Glacier Securities Limited-Series 2010-2 (Glacier Series 2010-2) as shown below:
•AAA (sf) rating to the Class A notes aggregating GBP39,618,042, paying a fixed coupon of 0.25% p.a.;
•AA (sf) rating to the Class B notes aggregating GBP10,005,650, paying a fixed coupon of 0.30% p.a.;
•A (sf) rating to the Class C notes aggregating GBP10,005,650, paying a fixed coupon of 0.35% p.a. and

The Class D, Class E and Class F notes, which are junior to the above class of notes, are not rated.

Glacier Securities Limited (the Issuer) is an issuer under the Glacier Multi-Issuer Asset-Backed Medium Term Note Programme (the Programme). The transaction is backed by EUR127.59 million of Class A1a notes, due September 2045 (ISIN: XS0328024608), (Underlying Notes) issued by Eurosail-UK 2007-5NP PLC (Eurosail 2007-5NP).

The rating is based upon review by DBRS of the following analytical considerations:

•The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination and excess spread, if available. The Class A is the most senior class of notes in the structure and is supported by five classes of subordinated notes, the Class B, C, D, E and F notes. Total credit support for the Class A notes is at 61.83%. Likewise, the Class B notes have credit enhancement of 52.19%, and Class C notes have 42.55% credit enhancement from subordinated classes, respectively.

•The Underlying Notes are denominated in EUR whereas the mortgages backing these notes are denominated in GBP. The currency risk exposure for the Underlying Notes’ holders, which was hedged at close of Eurosail 2007-5NP, is currently unhedged, after the collapse of Lehman Brothers Special Financing Inc.in September 2008, the currency swap provider. As a result of the depreciation of GBP vs. EUR since the close of Eurosail 2007-5NP, the Notes outstanding under this transaction may, absent of an appreciation of sterling, end up under-collateralised. However, Class A1a Eurosail 2007-5NP notes, with the current GBP equivalent outstanding of GBP394.78 million, are effectively over-collateralised to the extent of 5.26%. The currency risk exposure for the Glacier Series 2010-2 notes is partially mitigated by conversion of the EUR receipts from Underlying Notes into GBP immediately after receipt to make payments on GBP notes under Glacier 2010-2. The currency risk exposure is also partially hedged by five cross-currency American options. If not for the timing difference between the conversion of GBP into EUR (under Eurosail 2007-5NP) and the conversion back into GBP under Glacier Series 2010-2, the re-securitised notes under Glacier 2010-2 would have enjoyed a natural hedge.

•The credit quality of the mortgages backing the Underlying Notes and ability of the Servicer to perform collection activities on the mortgages.

•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.

•The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

DBRS applied its UK Re-securitisation Criteria to assess the mortgage loss on the underlying mortgage portfolio for Eurosail 2007-5NP and to the issuance of notes under Glacier Series 2010-2.

Note:
All figures are in GBP unless otherwise noted.

The principal methodologies applicable are Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda, Legal Criteria for European Structured Finance Transactions and Swap Criteria for European Structured Finance Transactions which can be found on www.dbrs.com.

The sources of information used for this rating include performance data relating to UK non-conforming mortgage pools, and investor reports on Eurosail 2007-5NP sourced from Intex. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is the first DBRS rating on this financial instrument.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

For additional information on these ratings, please refer to the linking document.

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: February 29 2012