OREANDA-NEWS. Fitch Ratings has assigned Gemgarto 2015-1 plc final ratings, as follows:

GBP423,000,000 Class A: 'AAAsf', Outlook Stable
GBP19,300,000 Class B: 'AAsf', Outlook Stable
GBP19,300,000 Class C: 'Asf', Outlook Stable
GBP21,800,000 Class D: 'BBBsf', Outlook Stable
GBP9,700,000 Class Z: not rated
GBP14,500,000 Class X1: 'BB-sf', Outlook Stable
GBP4,900,000 Class X2: not rated

This transaction is a securitisation of owner-occupied (OO) residential mortgages originated by Kensington Mortgage Company (Kensington). Fitch considers the collateral to be near-prime due to robust underwriting standards in line with what Fitch would expect of a specialised near-prime lender. Kensington is the mortgage administrator but delegates its responsibilities and obligations to Homeloan Management Limited (HML).

Initial credit enhancement for the class A notes at 12.5% is provided by the subordination of the class B to class D notes.

KEY RATING DRIVERS

Post-Crisis Near-Prime
The latest transaction which securitised similar loans, Gemgarto 2012-1, has performed strongly, with three months plus arrears significantly lower than market average. For Gemgarto 2012-1, 1.4% of loans are more than three months plus arrears against the sector average of around 10%. The performance data received for the post-crisis originated loans on Kensington's book also confirmed the robust performance and there have only been four repossession cases for these originations to date.

Limited Repossession Data
Given the strong performance, a limited number of loans have been repossessed and sold. Typically Fitch would base its quick sale adjustment (QSA) on lenders' historical data. However, given the robust valuation policy since 2010 and Kensington's overall servicing ability, Fitch has assumed a QSA in line with the market.

Unrated Originator and Seller
The originator and seller are not rated entities and as such may have limited resources available to repurchase any mortgages in the event of a breach of the representations and warranties (RW) given to the issuer. While this is a weakness, there are a number of mitigating factors, such as an extended loan file review performed by Fitch, a third party assessment conducted on the asset portfolio information which showed no errors, and a low occurrence of previous breaches of the RW. In Fitch's view, these mitigating factors make the likelihood of a RW breach remote.

Combined Liquidity, General Reserve
The transaction is supported by a non-amortising rated note reserve fund (RNRF) set at 2% of the collateral balance at closing. Initially the majority of the RNRF provides liquidity only to the class A and class B notes, but as they amortise, the amount allocated for liquidity will fall in line with the note balances (2.5% of class A and B outstanding) and the remainder will become available to absorb credit losses.