Rating Action Commentary
ֳ Affirms Ludgate Funding PLC Series 2006 FF1
Thu 22 Feb, 2024 - 10:44 AM ET
ֳ - London - 22 Feb 2024: ֳ has affirmed Ludgate Funding PLC Series 2006 FF1's notes and removed them from Rating Watch Negative (RWN), as detailed below.
Transaction Summary
Ludgate Funding Plc Series 2006 is secured by loans originated by Wave Lending Limited (formerly Freedom Funding Limited) and purchased by Merrill Lynch International Bank Limited. The loans are buy-to-let (BTL) and non-conforming owner-occupied (OO) and secured against properties located in England and Wales.
KEY RATING DRIVERS
Transition to Alternative Reference Rate: ֳ placed the notes on RWN in July 2023. We had previously revised the Outlooks on the notes to Negative due to the risk that they could move to a fixed interest rate if they did not transition to an alternative reference rate by March 2024 when the Financial Conduct Authority planned to stop publication of three-month GBP Libor.
The issuer published a notice to noteholders in January 2024 following consent from noteholders to transition to compounded daily SONIA. ֳ has consequently removed the notes from RWN and assigned Stable Outlooks.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
The transaction's performance may be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated with increasing levels of delinquencies and defaults that could reduce credit enhancement (CE) available to the notes.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and potentially upgrades.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, ֳ in relation to this rating action.
DATA ADEQUACY
ֳ has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. ֳ has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
ֳ did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and ֳ is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Overall, and together with any assumptions referred to above, ֳ's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Ludgate Funding Plc Series 2006 FF1 has an ESG Relevance Score of '4' for Customer Welfare - Fair Messaging, Privacy & Data Security due to due to a material concentration of interest only loans, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
Ludgate Funding Plc Series 2006 FF1 has an ESG Relevance Score of '4' for Human Rights, Community Relations, Access & Affordability due to mortgage pools with limited affordability checks and self-certified income, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ֳ's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ֳ's ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.
Additional information is available on
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
| Ludgate Funding Plc Series 2006 FF1 | UK Issued, EU Endorsed |