DBRS Confirms Rating to Restructured Glacier Securities Limited-Series 2011-1 Notes

DBRS Ratings Limited (DBRS) has today confirmed ratings to some of the restructured notes issued under Glacier Securities Limited-Series 2011-1 (Glacier Series 2011-1) as shown below:
• AAA (sf) rating to the Class A notes aggregating EUR33,995,882, paying a fixed coupon of 0.25% p.a.;
• AA (sf) rating to the Class B notes aggregating EUR6,169,287, paying a fixed coupon of 0.30% p.a.;
• A (sf) rating to the Class C notes aggregating EUR6,763,366, paying a fixed coupon of 0.35% p.a. and
• BBB (sf) rating to the Class D notes aggregating EUR5,227,899, paying a fixed coupon of 0.40% p.a.

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

Glacier Securities Limited (the Issuer) is an issuer under the Glacier Multi-Issuer Asset-Backed Medium Term Note Programme (the Programme). At closing the transaction was backed by EUR235 million (face value amount) of Class A notes (Underlying Notes), due March 2046, issued by Mortgage Funding 2008-1 PLC (MF2008-1) (ISIN: XS0350039912). The Underlying Notes were sold by a special purpose vehicle Tamarin Securities Limited to the Issuer. During the past 12 months the credit support to the rated notes has increased in comparison to that at closing of the transaction by deleveraging.

Effective 24 December 2012, the capital structure of Glacier 2011-1 has changed. 50% of the underlying MF2008-1 notes have been sold by the issuer. The proceeds of the sale have been used to pay down the different classes of notes under Glacier 2011-1. The resulting capital structure reinstates the credit support to the Class A, Class B and Class C rated notes to that at closing of the transaction and that for the Class D has been increased. The currency risk exposure of the transaction is proposed to be hedged by currency options with half the notionals as compared to the ones at closing of the transaction. This reduction in notionals of the currency options by half mirrors the reduction of the aggregate outstanding under Glacier 2011-1 to approximately the same extent. DBRS has re-assessed the asset performance and cash flows of the capital structure as a result of this restructuring.

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 5 classes of subordinated notes, the class B, C, D, E and F notes. Total credit support for the Class A notes is at 52.85%. Likewise, the Class B notes have a credit enhancement of 44.3%, Class C notes have 34.92% credit enhancement and Class D notes have 27.67% 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 MF2008-1, 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 close of MF2008-1, the notes outstanding under MF2008-1 may, absent of an appreciation of sterling, end up under-collateralised. The currency risk exposure of the Underlying Notes is partially hedged under Glacier Series 2011-1 using GBP:EUR cross-currency options. The currency options give a right to the Issuer to convert GBP into EUR at a pre-determined strike rate.

• 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 estimated mortgage loss on the underlying mortgage portfolio for MF2008-1.

Note:
All figures are in EUR 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, Operational Risk Methodology for EU Structured Finance Servicers, Unified Interest Rate Model Methodology for European Securitisations 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 data relating to one UK non-conforming mortgage pools, and investor reports on MF2008-1 provided by Investec Bank Plc and that available on Intex. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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

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

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Quincy Tang
Initial Rating Date: November 8 2011