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December 28, 2007 |
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RMAC SECURITIES: Moody's Cuts Ratings to Ba2 on Three Notes Moody's Investors Service downgraded or placed on review for possible downgrade these series of notes issued by RMAC Securities No. 1 Plc: * Series 2006-NS2, Class M2c -- Current Rating: A2, on review for possible downgrade * Series 2006-NS2, Class B1a -- Current Rating: Baa3, on review for possible downgrade * Series 2006-NS2, Class B1c -- Current Rating: Baa3, on review for possible downgrade * Series 2006-NS3, Class M2c -- Current Rating: A3 -- Prior Rating: A2 * Series 2006-NS3, Class B1c -- Current Rating: Ba2 -- Prior Rating: Baa3 * Series 2006-NS4, Class M2a -- Current Rating: A3 -- Prior Rating: A2 * Series 2006-NS4, Class M2c -- Current Rating: A3 -- Prior Rating: A2 * Series 2006-NS4, Class B1a -- Current Rating: Ba2 -- Prior Rating: Baa3 * Series 2006-NS4, Class B1c -- Current Rating: Ba2 -- Prior Rating: Baa3 The classes of notes that have been downgraded were previously placed on review for possible downgrade on the Oct. 3, 2007. At that time, Moody's noted that interest rate volatility was adversely affecting these transactions because they had no protection from interest rate risk or basis risk. The reduced excess spread available in these transactions has necessitated new or further drawings in the reserve funds, notwithstanding the relatively good performance of the collateral backing the outstanding notes. As of the latest interest payment date in December 2007, the reserve fund of the Series 2006-NS3 was drawn for the second consecutive time leaving in the transaction a reserve fund equal to 73% of the required amount. The reserve funds of Series 2006-NS2 and 2006- NS4 were also drawn for the first time and their current balances are now equal, respectively, to 86% and 87% of the corresponding required amounts. Considering the level at which the note Libor for the RMAC Series has reset in December 2007 (6.63%), and the recently reduced Bank of England Base Rate (5.50%), Moody's expects these transactions to continue to be exposed for at least another quarter to spread compression above the levels Moody's assumed when these transactions closed. These rating actions reflect the negative effects of this interest rate volatility, taking into account the different seasoning of the collateral, the performance exhibited so far and the available credit enhancement in these structures. |
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