Moody's Assigns Provisional Rating to Hadrian Funding 2025-1 PLC's Notes

Strategic Insights -

The Moody's Investors Service has issued a provisional rating to the Notes issued by Hadrian Funding 2025-1 PLC, a UK-based mortgage-backed securities transaction. The rating, (P)Aaa (sf), reflects the credit quality of the portfolio, structural features, and legal integrity of the transaction. The Notes are backed by a pool of prime United Kingdom residential mortgage loans originated by Newcastle Building Society, with approximately £884.8 million in assets as of February 28, 2025.

Key Takeaways:

  • The Notes are backed by a pool of prime UK residential mortgage loans originated by Newcastle Building Society, with a total asset value of approximately £884.8 million.
  • The transaction features a granular portfolio and an amortising liquidity reserve sized at 1.37% of the Class A Note balance, but also has credit weaknesses such as unlimited product switches, which could lead to spread compression.
  • The expected loss is 0.8%, in line with the UK prime sector average, and is based on Moody's assessment of the lifetime loss expectation for the pool.
  • The MILAN Stressed Loss for this pool is 4.5%, consistent with the UK prime sector average, and is based on the WA current LTV for the pool, top 20 borrowers, static nature of the pool, and share of self-employed borrowers.
  • The ratings methodology used was "Residential Mortgage-Backed Securitizations" published in October 2024, available at https://ratings.moodys.com/rmc-documents/429877.
  • Factors that may lead to a downgrade of the rating include increased counterparty risk, economic conditions worse than forecast, higher arrears, and increased losses.

Statistics:

  • Total asset value: £884.8 million (as of February 28, 2025)
  • Expected loss: 0.8%
  • MILAN Stressed Loss: 4.5%
  • Credit enhancement for the Class A Notes: 10%
  • Reserve Fund at closing: 1.37% of the total Notes balance

Sources:

  • Moody's Investors Service
  • "Residential Mortgage-Backed Securitizations" methodology, published October 2024, available at https://ratings.moodys.com/rmc-documents/429877.
  • Newcastle Building Society (NR)
  • Hadrian Funding 2025-1 PLC
  • Canopius Mortgage Indemnity (Syndicate 4444) (NR)