OREANDA-NEWS. September 21, 2015. Fitch Ratings has downgraded Finance for Residential Social Housing (Fresh) PLC's Series 1 and 2 notes and maintained them on Rating Watch Negative (RWN), as follows:

Series 1 Class A1 notes: downgraded to 'BBB+sf' from 'AA+sf'; RWN maintained
Series 1 Class A2 notes: downgraded to 'BBB+sf' from 'AA+sf'; RWN maintained
Series 1 Class A3 notes: downgraded to 'BBB+sf' from 'AAsf'; RWN maintained
Series 1 Class B notes: 'BBBsf'; RWN maintained
Series 2 Class A notes: downgraded to 'BBB+sf' from 'AAsf'; RWN maintained
Series 2 Class B notes: 'BBBsf'; RWN maintained

Fresh is a securitisation of housing loans originated by The Housing Corporation (THC), Housing for Wales Tai Cymru (TC) and the Public Works Loan Board (PWLB), to housing associations in England and Wales. The series 1 notes are backed by fixed-rate loans while the series 2 notes are backed by variable-rate loans.

KEY RATING DRIVERS
Royal Bank of Scotland (RBS; BBB+/Stable/F2), as the account bank and cash administrator of the transaction, has indicated it is unlikely that any replacement will be appointed following their downgrade on 19 May 2015. Given the lack of account bank replacement and no prospect of any replacement counterparty being forthcoming, Fitch is capping the ratings of the notes at the rating of RBS.

The ratings remain on RWN pending clarification of a number of structural points. Specifically, the calculation and effects on the principal deficiency ledger of Series 1 "premium interest" and "premium amount", have yet to be ascertained. In addition, the allocation and repayment of the Series 2 "deferred interest" amount remains uncertain. The application of these structural features has the potential to affect the ultimate repayment of the notes and therefore their ratings.

RATING SENSITIVITIES
Currently Fitch is unable to assess the likelihood of each class repaying inclusive of premium and deferred interest and therefore, should the issues not be resolved the ratings may be withdrawn. We expect to resolve the RWN within four weeks providing the necessary information can be supplied. RBS have indicated a willingness to work with Fitch to resolve this in a timely manner.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transaction. We found that two different asset balances are currently reported for each series and that the differences in these amounts are not being explained. The amount of interest deferred on the Series 2 loans, in our view part of the assets to consider in our analysis, is also missing. We expect these issues to be addressed prior to our resolution of the RWN.

Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies - save for the abovementioned reporting issues, which are being addressed - indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Transaction reporting provided by RBS as at end-April 2015 (latest available investor report; report is semi-annual)
- Discussions with RBS concerning outstanding structural points and counterparty expectations in September 2015