Fitch affirms Glastonbury Finance 2007-1
Global rating agency Fitch has affirmed Glastonbury Finance 2007-1. The affirmations reflect the notes' level of credit enhancement relative to the portfolio's credit quality. Assets rated 'CCC' or below have remained stable since the last surveillance review and account for 11.9% of the portfolio, while current defaulted assets in the pool account for GBP31.0m. CMBS assets represent 80% of the portfolio with whole business securitisations (WBS) making up the remainder. 62% of the portfolio is exposed to the UK, followed by 28% in Germany, 6% in Italy and 4% in the Netherlands.
The Negative Outlook on the class A1 and A2 notes reflects the portfolio's increased obligor concentration, which may expose the transaction to the idiosyncratic risk of default of the largest obligors. The largest obligor in the portfolio represents 12.9% of the notional and the top five assets account for 51.3%, increased from 11.8% and 48.3% as of the last review, respectively. Fitch expects the obligor concentration in the portfolio to increase as new assets are no longer introduced into the portfolio due to the end of the reinvestment period.
Fitch believes a material risk for the transaction is that the underlying structured finance assets' maturity may extend beyond their reported weighted average life. The agency incorporated this extension risk into its analysis of the portfolio. Class A1 over-collateralisation (OC) test is passing, whereas OC tests for the rest of the notes are failing, despite them improving since the end of the reinvestment period in May 2010. According to the transaction documents, the collateral manager may continue to sell defaulted or credit-risk assets after the reinvestment period, but may no longer reinvest any principal proceeds. The class X notes rank senior to the class A1 notes, including also a post-enforcement waterfall and pay a fixed scheduled instalment of GBP125,000 every quarter. As their balance as of the August 2012 note payment was GBP1.5m, the notes are expected to be fully redeemed on the August 2015 note payment.