TEXT-S&P rating actions on Provide VR 2002-1, 2003-1

Tue Dec 4, 2012 1:26pm EST

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OVERVIEW
     -- We have reviewed the performance of PROVIDE VR 2002-1 and PROVIDE-VR 
2003-1.
     -- Following our review, we have taken various rating actions in these 
transactions.
     -- PROVIDE VR 2002-1 and PROVIDE-VR 2003-1 are partially funded synthetic 
German RMBS transactions.
    
     Dec. 4 - Standard & Poor's Ratings Services today raised to 'AAA (sf)' from
'AA (sf)' its credit rating on PROVIDE VR 2002-1's class C notes and PROVIDE-VR
2003-1 PLC's class B notes. At the same time, we lowered to 'D (sf)' from 'CCC-
(sf)' our rating on PROVIDE VR 2002-1's class D notes. We have also affirmed our
ratings on all other classes of notes in these transactions (see list below).

Today's rating actions follow our analysis of the performance of these 
transactions, using the latest available data from the investor reports (dated 
November 2012 for PROVIDE VR 2002-1 and September 2012 for PROVIDE-VR 2003-1). 

Since closing, sequential amortization and net losses have reduced the 
principal balance in PROVIDE VR 2002-1 to approximately EUR56.7 million from 
EUR623.3 million, and in PROVIDE-VR 2003-1 to approximately EUR84.0 million from
EUR449.0 million.

In both transactions, delinquencies in the 30, 60, and 90+ days buckets have 
been reported below 1% since the beginning of 2005.

Credit events (i.e., loans in foreclosure) have decreased in absolute terms:
     -- Since 2005 in PROVIDE VR 2002-1, when they peaked at about EUR18.2 
million, to EUR4.1 million currently; and 
     -- Since 2007 in PROVIDE-VR 2003-1, when they peaked at about EUR10.9 
million, to about EUR3.9 million currently.
  
Since our previous reviews of PROVIDE VR 2002-1 and PROVIDE-VR 2003-1 on Sept. 
28, 2011 and Dec. 2, 2011, respectively, cumulative net losses have further 
increased (see "Ratings Raised On German RMBS PROVIDE VR 2002-1's Class B And 
C Notes Due To Increased Credit Enhancement; Rest Affirmed," published on 
Sept. 28, 2011, and "Ratings Raised On German RMBS PROVIDE VR 2003-1's Class C 
Notes Due To Increased Credit Enhancement; Rest Affirmed," published on Dec. 
2, 2011).

According to the latest investor report (for the Nov. 27, 2012 payment date), 
net losses have reduced PROVIDE VR 2002-1's class E notes' balance to zero. At 
the same time, losses were allocated to the next most junior tranche, the 
class D notes, whose balance has been reduced to EUR22.8 million from EUR23.0 
million. Since September 2011, cumulative net losses in PROVIDE VR 2002-1 have 
increased, by approximately EUR1.3 million, to about EUR15.8 million--or 2.5% of
the closing balance.

In PROVIDE-VR 2003-1, net losses have reduced the class E notes' balance to 
approximately EUR1.3 million currently, from EUR2.0 million in December 2011. We
have observed regular net losses in this transaction since 2006. However, the 
amounts have decreased over the past two years, averaging at about EUR325.000 
per quarter since 2010. Cumulative net losses in PROVIDE-VR 2003-1 amount to 
approximately EUR9.2 million, or 2.1% of the closing balance.

Recovery rates have remained low at about 35%, in both transactions, due to a 
relatively high amount of second-lien mortgages.

Taking into account realized losses and delinquencies to date, and considering 
historical recovery rates in these particular portfolios, we have assessed the 
likelihood of future losses for both the performing and nonperforming parts of 
the collateral pools.

We have raised to 'AAA (sf)' from 'AA (sf)' our ratings on PROVIDE-VR 2003-1's 
class B and PROVIDE VR 2002-1's class C notes because of the increased credit 
enhancement available to these classes of notes.

We have also lowered to 'D (sf)' from 'CCC- (sf)' our rating on PROVIDE VR 
2002-1's class D notes because net losses have been allocated to this class of 
notes on the latest payment date.

Furthermore, we have affirmed our ratings on PROVIDE VR 2002-1's class A, B, 
and E notes and PROVIDE-VR 2003-1's class A+, A, C, D, and E notes, as we 
consider the current amount of credit enhancement available to them to be 
commensurate with their current ratings.

Amortization has reduced the pool factors in PROVIDE VR 2002-1 and PROVIDE-VR 
2003-1 to 9% and 19%, respectively. We will continue to monitor the 
development of credit events, arrears, and actual losses in these transactions.

PROVIDE VR 2002-1 and PROVIDE-VR 2003-1 are partially funded synthetic German 
residential mortgage-backed securities (RMBS) transactions using the Provide 
Platform provided by Kreditanstalt fur Wiederaufbau (AAA/Stable/A-1+).
  
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
  
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating 
relating to an asset-backed security as defined in the Rule, to include a 
description of the representations, warranties and enforcement mechanisms 
available to investors and a description of how they differ from the 
representations, warranties and enforcement mechanisms in issuances of similar 
securities. The Rule applies to in-scope securities initially rated (including 
preliminary ratings) on or after Sept. 26, 2011.

If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this 
credit rating report are available at 
"RELATED CRITERIA AND RESEARCH

     -- Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 
1, 2012
     -- Economic Research: The Eurozone's new Recession--Confirmed, Sept. 25, 
2012
     -- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012
     -- Why Germany's Rising House Prices Are Bucking The European Trend, 
April 23, 2012
     -- European Structured Finance Scenario And Sensitivity Analysis: The 
Effects Of The Top Five Macroeconomic Factors, March 14, 2012
     -- Ratings Raised On German RMBS PROVIDE VR 2003-1's Class C Notes Due To 
Increased Credit Enhancement; Rest Affirmed, Dec. 2, 2011
     -- Germany (Federal Republic of), Nov. 11, 2011
     -- Global Structured Finance Scenario And Sensitivity Analysis: The 
Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
     -- Ratings Raised On German RMBS PROVIDE VR 2002-1's Class B And C Notes 
Due To Increased Credit Enhancement; Rest Affirmed, Sept. 28, 2011
     -- Principles Of Credit Ratings, Feb. 16, 2011
     -- Methodology And Assumptions: Update To The Criteria For Rating German 
Residential Mortgage-Backed Securities, Jan. 6, 2009
     -- Swap Risk Ratings Introduced For Synthetic CDO And Credit Derivative 
Transactions, Sept. 14, 2006
     -- Criteria for Rating German Residential Mortgage-Backed Securities, 
Aug. 31, 2001
  
RATINGS LIST

Class              Rating
            To               From

PROVIDE VR 2002-1
EUR115.45 Million Floating-Rate Credit-Linked Notes

Rating Raised

C           AAA (sf)         AA (sf)

Rating Lowered

D           D (sf)           CCC- (sf)

Ratings Affirmed

A           AAA (sf)
B           AAA (sf)
E           D (sf)

PROVIDE-VR 2003-1 PLC
EUR75.75 Million Floating-Rate Credit-Linked Notes

Rating Raised

B           AAA (sf)         AA (sf)

Ratings Affirmed

A+          AAA (sf)
A           AAA (sf)
C           BBB (sf)
D           CCC- (sf)
E           D (sf)
FILED UNDER:
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