TEXT-S&P puts rtgs in Clavis Securities 2006-01 & 2007-01 on CW neg

Mon Dec 10, 2012 8:16am EST

Dec 10 -

OVERVIEW

-- On May 30, 2012, we lowered our ratings on Danske Bank A/S --the GIC and liquidity provider for Clavis Securities series 2006-01 and 2007-01.

-- Following this downgrade, a breach of transaction rating triggers occurred and monies held in the GIC account were swept to the transaction account.

-- We have been advised that the transaction account earns a flat rate of interest and have run an initial review of the transaction incorporating this structural change.

-- Following our review, we have today placed on CreditWatch negative the mezzanine and junior classes of notes in Clavis Securities series 2006-01 and 2007-01.

-- Clavis Securities' series 2006-01 and series 2007-01 are U.K. RMBS transactions backed by residential mortgages originated by GMAC Residential Funding Co.

Standard & Poor's Ratings Services placed on CreditWatch negative its credit ratings on the class M1, M2, B1, and B2 notes in Clavis Securities PLC's series 2006-01 and 2007-01. Additionally, we have placed on CreditWatch negative our rating on the class AZ notes in series 2007-01 (see list below).

On May 30, 2012, we lowered our long- and short-term ratings on Danske Bank A/S--the guaranteed investment contract (GIC) and liquidity provider for Clavis Securities' series 2006-01 and series 2007-01 (see "Related Criteria And Research").

Following the downgrade, rating triggers under the GIC and liquidity facility documentation were breached in each transaction. Following the issuer's inability to replace Danske Bank and to remedy this breach, a standby liquidity drawing was made and all monies held in the GIC account were transferred to the transaction account.

We have been advised that monies held in the transaction account earn a flat interest rate. Monies previously held in the GIC account received a rate of interest linked to LIBOR. We have modeled this change in interest that the transaction can earn into our cash flow models, and this affects our ratings under our stress of varying LIBOR on the transactions' cash flows. As such, we have placed on CreditWatch negative our ratings on the transactions' mezzanine and junior notes.

Clavis Securities' series 2006-01 and series 2007-01 are U.K. residential mortgage-backed securities (RMBS) transactions backed by residential mortgages originated by GMAC Residential Funding Co. LLC.

RELATED CRITERIA AND RESEARCH

-- Counterparty Risk Framework Methodology And Assumptions, Nov. 29, 2012

-- U.K. Nonconforming RMBS Index Report Q3 2012: Major Downgrades Currently Unlikely Over The Next Quarter, Although Collateral Performance May Weaken, Nov. 20, 2012

-- Danske Bank Downgraded To 'A-/A-2' On Continued Weak Irish Operations; Outlook Stable, May 30, 2012

-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012

-- U.K. RMBS Methodology And Assumptions, Dec. 9, 2011

-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011

-- Principles Of Credit Ratings, Feb. 16, 2011

-- European Legal Criteria For Structured Finance Transactions, Aug. 28, 2008

RATINGS LIST

Rating

Class To From

Clavis Securities PLC

EUR333.25 Million And GBP371.35 Million Mortgage-Backed Floating-Rate Notes Series 2006-01

RATINGS PLACED ON CREDITWATCH NEGATIVE

M1a BBB- (sf)/Watch Neg BBB- (sf)

M1b BBB- (sf)/Watch Neg BBB- (sf)

M2a BB (sf)/Watch Neg BB (sf)

B1a B+ (sf)/Watch Neg B+ (sf)

B1b B+ (sf)/Watch Neg B+ (sf)

Clavis Securities PLC

EUR314.6 Million And GBP338.9 Million Mortgage-Backed Floating-Rate Notes Series 2007-01

AZa BBB+ (sf)/Watch Neg BBB+ (sf)

M1a BBB- (sf)/Watch Neg BBB- (sf)

M1b BBB- (sf)/Watch Neg BBB- (sf)

M2a BB- (sf)/Watch Neg BB- (sf)

M2b BB- (sf)/Watch Neg BB- (sf)

B1a B (sf)/Watch Neg B (sf)

B1b B (sf)/Watch Neg B (sf)

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article