OREANDA-NEWS. Fitch Ratings has affirmed Tombac No.1 plc as follows:

Class A1 (XS1055472424) affirmed at 'AAAsf; Outlook Stable
Class A2 (XS1055475872) affirmed at 'AAAsf; Outlook Stable

The mortgage portfolio comprises prime owner-occupied loans originated by Accord Mortgages Limited, a wholly owned subsidiary of Yorkshire Building Society (YBS, A-/Stable/F1).

KEY RATING DRIVERS
Good Performance
The transaction closed in April 2014 and therefore both early- and late-stage arrears are limited. Loans in arrears for more than one month account for 4bps of the outstanding portfolio balance, while three-months plus arrears represent 2bps of the outstanding balance. No properties have been taken into possession since transaction close.

The transaction has reported high prepayments of on average 17.4% annualised. This is a result of fixed rated borrowers opting to refinance their mortgages at the end of their teaser periods instead of reverting to Accord's standard variable rate (SVR) of 5.8%.

Lack of Hedging
The transaction does not feature a swap, but the fixed rated loans and the fixed rated notes are currently naturally hedged. The hedge will disappear over the next six years as the fixed rated loans revert to floating at the end of their teaser periods. In its analysis, Fitch assumed that future SVRs are at 2.5% + GBP Libor. The agency found the current credit enhancement to be sufficient to withstand these stresses on excess spread in a 'AAAsf' stress scenario.

Account Bank Provider
The account bank and guaranteed investment contract provider is YBS and the transaction documents incorporate a minimum account bank rating at 'BBB-/F2'. This is below the minimum rating trigger for direct support counterparties set in Fitch's counterparty criteria of 'A/F1'. In its analysis of the transaction, the agency assumed a loss of two months of scheduled principal and interest receipts. The analysis showed that the current credit enhancement is sufficient to withstand the loss.

In addition, the reserve fund is held in a separate account with Citibank N.A. (A/Stable/F1), which meets the minimum rating threshold defined in Fitch's counterparty criteria.

RATING SENSITIVITIES
Deterioration in asset performance may result from economic factors. A corresponding increase in new defaults and associated pressure on excess spread and the reserve fund, beyond Fitch's assumptions, could result in negative rating actions. Furthermore, unexpected increases of interest rates might jeopardise the loan affordability of the underlying borrowers.