Moody's Assigns Provisional Rating to Notes in Coventry Building Society Securitization Transaction

Strategic Insights -

The Moody's Investors Service has provisionally rated the Notes to be issued by Economic Master Issuer PLC Series 2025-1, a securitization transaction sponsored by Coventry Building Society. The transaction, the sixth issuance from a master issuer securitization structure, consists of prime residential mortgages originated by Coventry Building Society. As of the provisional pool cut-off date of April 30, 2025, the portfolio includes 15,588 prime borrowers and a pool balance of £2,456.6 million.

Key Takeaways:

  • The Moody's rating is primarily based on the credit quality of the portfolio, the structural features of the transaction, and its legal integrity.
  • The transaction benefits from various credit strengths, including a granular portfolio, relatively low average loan-to-value, and the application of the Moody's Portfolio Variation (MPV) test.
  • The transaction features some credit weaknesses, such as the presence of offset mortgage loans and interest rate risk not hedged for Bank of England Base rate (BBR) and standard variable rate (SVR) linked loans.
  • Moody's determined the portfolio lifetime expected loss of 0.5% and MILAN Stressed Loss of 4.0% related to borrower receivables.
  • The expected loss captures Moody's expectations of performance considering the current economic outlook, while the MILAN Stressed Loss captures the loss Moody's expects the portfolio to suffer in the event of a severe recession scenario.
  • The transaction has structural features like the Minimum Seller's Note amount and the presence of the Class Z(S) VFN Notes.
  • The principal methodology used in this rating was "Residential Mortgage-Backed Securitizations" published in October 2024.
  • The rating is provisionally assigned to the GBP [X]M Series 2025-1 Class A Notes due April 2075, which will remain subject to a final review.
  • The subordination requirement for the Class A Notes is 11.0%, which is the same as in previous transactions.

Statistics:

  • 15,588 prime borrowers in the portfolio as of April 30, 2025.
  • Pool balance of £2,456.6 million as of April 30, 2025.
  • Portfolio expected loss of 0.5%.
  • MILAN Stressed Loss of 4.0%.

Sources:

  • Moody's Ratings, "Moody's Assigns Provisional Rating to Notes in Coventry Building Society Securitization Transaction"
  • "Residential Mortgage-Backed Securitizations" published in October 2024, available at https://ratings.moodys.com/rmc-documents/429877.