London, 13 September 2012 -- Moody's has determined that the proposed action of The Royal Bank of Scotland plc (the "Swap Counterparty") not to take any remedial action either now or in the future following the breach of the first or second rating triggers (as the case may be) under the swap agreements (the "Proposal") will not, in and of itself and at this time, result in a downgrade or withdrawal of the current ratings of the notes (the "Notes") issued by Celtic Residential Irish Mortgage Securitisation No. 14 (also "Celtic 14"), Celtic Residential Irish Mortgage Securitisation No. 15 (also "Celtic 15") and Celtic Residential Irish Mortgage Securitisation No. 16 Ltd (also "Celtic 16" or together the "Issuers").
This opinion is primarily based on the current rating of The Royal Bank of Scotland (A3/P-2) relative to the current ratings of the Notes and the nature of the swaps (which hedge basis and EUR fixed floating risk). Moody's opinion addresses only the credit impact of the proposed action, and Moody's is not expressing any opinion as to whether the action has, or could have, other non-credit related effects that may have a detrimental impact on the interests of noteholders and/or counterparties.
Moody's has assessed the probability and impact of a default of the swap counterparty on the ability of the Issuers to meet their obligations under the transactions, including the impact of the loss of any benefit from the swaps and any obligation the Issuers may have to make a termination payment.
The principal methodology used in these ratings was Moody's Approach to Rating RMBS in Europe, Middle East, and Africa published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Factors identified in the Rating Implementation Guideline, Framework for De-Linking Hedge Counterparty Risks from Global Structured Finance Cashflow Transactions published in October 2010 were also taken into account in the rating analysis.
Moody's notes that on 2 July 2012 it released a Request for Comment in which the rating agency requested market feedback on potential changes to its rating implementation guidance for the hedge counterparty risk in structured finance transactions. If the revised rating implementation guidance is implemented as proposed, the rating of the Notes should not be negatively affected. Please refer to Moody's Request for Comment, entitled "Approach to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow Transactions" for further details regarding the implications of the proposed methodology changes on Moody's ratings.
As the euro area crisis continues, the rating of structured finance notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could negatively impact the ratings of the notes. Furthermore, as discussed in Moody's special report "Rating Euro Area Governments Through Extraordinary Times -- An Updated Summary," published in October 2011, Moody's is considering reintroducing individual country ceilings for some or all euro area members, which could affect further the maximum structured finance rating achievable in those countries.
Moody's will continue to monitor the ratings of the transaction. Any change in the ratings will be publicly disseminated by Moody's through appropriate media.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Sebastian Hoepfner Analyst Structured Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Michelangelo Margaria VP - Senior Credit Officer Structured Finance Group Telephone:+39-02-9148-1100 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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