OREANDA-NEWS. Fitch Ratings has affirmed the Provide Blue 2005 Series, with Outlook changes to two tranches as follows:

Provide Blue 2005-1 PLC:
Class D (ISIN DE000A0E6NX2): affirmed at 'BBBsf'; Stable Outlook
Class E (ISIN DE000A0E6NY0): affirmed at 'BB-sf'; Stable Outlook

Provide Blue 2005-2 PLC:
Senior credit default swap: affirmed at 'AAAsf'; Stable Outlook
Class A+ (ISIN DE000A0GHZR1): affirmed at 'AAAsf'; Stable Outlook
Class B (ISIN DE000A0GHZS9): affirmed at 'AAsf'; Stable Outlook
Class C (ISIN DE000A0GHZT7): affirmed at 'Asf'; Outlook revised to Stable from Negative
Class D (ISIN DE000A0GHZU5): affirmed at 'BBsf'; Outlook revised to Stable from Negative
Class E (ISIN DE000A0GHZV3): affirmed at 'CCCsf'; Recovery Estimate (RE) revised to 70% from 60%

Both transactions are synthetic securitisations referencing portfolios of residential mortgage loans originated by BHW Bausparkasse AG.

KEY RATING DRIVERS

Stable Asset Performance
Both transactions have reported stable asset performance over the past 12 months with three months plus arrears decreasing to EUR3.5m (from EUR3.9m) for 2005-1 and to EUR9.4m (from EUR11.1m) for 2005-2, respectively. As a share of the outstanding principle balance, three months plus arrears increased during the same period, driven by strong repayments observed in the last three quarters.

Strong Repayments Support Credit Enhancement
The annualised principal repayment rate is 68% for 2005-1 during September-November 2014 and 45% for 2005-2 during July-September. Repayments are driven by upcoming maturities and interest reset dates, and are likely to remain high during 2015. Strong repayments have contributed to an increase in credit enhancement (CE) relative to the reference claims principal balance, which is reflected in today's rating affirmation and Outlook revision.

Loss allocation has remained fairly high and reduced nominal CE for the class E notes in the past 12 months by EUR0.4m to EUR6.1m for 2005-1 and by EUR1.5m to EUR5m for 2005-2. CE as a percentage of the outstanding balance for the class E notes accounts for 3.5% for 2005-1 and 0.6% for 2005-2.

Fitch expects loss allocation to be in excess of the available threshold for 2005-2 as the available CE is not sufficient to absorb the loss expectation on the class E notes in our base case scenario. Fitch does not expect losses to allocated 2005-1's class E notes.

Following the regulatory call of 2005-1 on the January 2010 payment date, the senior CDS and class A+, A, B and C notes were paid in full. The amortisation of the class D and E notes is currently limited to proceeds received from cures and recoveries of the overdue reference claims exceeding new delinquencies in each period.

RATING SENSITIVITIES

Performance is dependent on the level of defaults and recovery once a borrower has defaulted. While Fitch expects continued robust performance of German mortgage loans, unexpectedly sharp deterioration of economic fundamentals could accelerate loss allocation towards the class E notes and threshold amount, adversely affecting CE for the junior notes and resulting in a downgrade.

In addition, for seasoned portfolios re- and prepayments may increase CE and reduce the potential for new credit events. If the reference claims repay earlier than final maturity this may reduce loss potential and increase CE, leading to potential upgrades across the transactions.