OREANDA-NEWS. Fitch Ratings has assigned Auburn Securities 9 plc's notes final ratings, as follows:

GBP 396.4m Class A floating rate notes: 'AAAsf', Outlook Stable
GBP 47.3m Class B floating rate notes: 'AAsf', Outlook Stable
GBP 26.3m Class C floating rate notes: not rated
GBP 13.1m Class D floating rate notes: not rated
GBP 15.8m Class E zero coupon notes: not rated
GBP 5.3m Class F zero coupon notes: not rated
GBP 10.5m Class Z1 zero coupon notes: not rated
GBP 10.5m Class Z2 zero coupon notes: not rated

This transaction is a securitisation of mostly residential buy-to-let (BTL) mortgages, originated in England and Wales by Capital Home Loans (CHL) before 2008. The mortgages were previously owned by CHL, or were part of Auburn Securities 3, 6 or 7 plc.

KEY RATING DRIVERS
Pre-crisis BTL Loans
The portfolio consists of nine-year seasoned BTL loans originated by CHL. Some of the loans are from the collapsed Auburn Securities 3, 6, and 7 plc transactions, all of which performed in line with or better than the Fitch UK BTL index. Fitch used the prime matrix to determine the foreclosure frequency on the loans, but given CHL's mortgage book performance, underwriting guidelines, and origination practices, we have applied an upward adjustment of 1.15 to the foreclosure frequencies.

In addition, as per criteria, Fitch applied an adjustment of 1.25 to stress the default rates of the BTL loans beyond those of a prime owner-occupied portfolio at all rating levels.

Low Margins, Favourable Affordability Classes
As the pool was originated under different economic conditions and market standards, the weighted-average (WA) interest rate is low, at around 2%. This results in a relatively high interest coverage ratio, implying solid affordability for borrowers and resulting in lower expected default probabilities.

Unhedged Basis Risk
98% of the loans are trackers, indexed to the Bank of England base rate (BBR). As the notes pay three-month LIBOR, and there is no swap in place, the transaction is exposed to basis risk between BBR and three-month LIBOR. Fitch stressed the transaction cash flows for basis risk according to its criteria. Combined with the low margins, this results in limited excess spread in Fitch's cash flow analysis.

Unrated Originator and Seller
CHL is not a rated entity, 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 that make the likelihood of a RW breach remote.

RATING SENSITIVITIES
The assigned ratings and the related analysis performed are based on the assumptions in the existing criteria - Criteria Addendum: UK, dated 11 June 2015. Material increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels greater than Fitch's base case expectations, which in turn may result in negative rating actions on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency, along with a 30% decrease in the WA recovery rate, would have no impact on the ratings of the class A notes and imply a downgrade of the class B notes to 'A-sf' from 'AAsf'.
Fitch's exposure draft report - Exposure Draft - Criteria Addendum: UK, dated 22 September 2015 has not been adopted (and the related model has not been through the full validation process), and these were not used in the rating analysis. Fitch has performed a sensitivity analysis which shows that if the criteria in that Exposure Draft (and the related model) were used, the assigned ratings would be:

Class A: 'AAA'
Class B: 'AA+'

More detailed model implied ratings sensitivity can be found in the new issue report which is available at www.fitchratings.com.

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

DATA ADEQUACY
CHL provided Fitch with a loan-by-loan data template. The data quality and availability was solid, with no material data fields missing.

Fitch received performance data including loans 3m-plus in arrears, for the total CHL book, covering vintages from 2004 to 2008. This period covers the years in which the majority of the loans were originated. CHL was also able to provide dynamic arrears data for the CHL portfolio. The performance of loans originated by CHL, which meet the eligibility criteria for Auburn 9, has been compared with Fitch's UK prime three-months-plus arrears index and other similar statistics from other UK prime lenders. The agency considers that the performance of CHL's eligible loans is commensurate with that of other UK lenders of BTL loans.

In May 2015, Fitch conducted a site visit to CHL's offices and a file review to check the quality of CHL's originations. During the site visit, Fitch conducted a review of a targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

The collateral review of the mortgage portfolio involves reviewing loan-by-loan loss severity information on the originator's sold repossessions, during which the agency determines the originator's experienced loss severity rate and quick sale discount. Fitch received data for 2,049 repossession cases for the pool.

The quick sale adjustment (QSA) for BTA flat/maisonette and BTL house property types repossessed by CHL was found to be higher than Fitch's standard assumption. The agency therefore used the actual QSA of 38% for a flat/maisonette and 29% for houses. Fitch also reviewed the results of an agreed-upon procedures report conducted on the portfolio. This report checked the accuracy of the data file provided to Fitch for its rating analysis. Some errors were reported, but they did not affect Fitch's rating analysis.

It is Fitch's opinion that the data available for the rating analysis is of good quality.

To analyse the CE levels, Fitch evaluated the collateral using its default model ResiEMEA. The agency assessed the transaction cash flows using default and loss severity assumptions under various structural stresses including prepayment speeds and interest rate scenarios.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by CHL as at 31 July 2015
- Transaction reporting provided by CHL for Auburn Securities 4 plc as at 28 October 2015, Auburn Securities 3 plc as at 3 January 2015 and Auburn Securities 6 plc and Auburn Securities 3 plc

MODELS
The models below were used in the analysis. Click on the link for a description of the model.
ResiEMEA
http://www.fitchratings.com/jsp/creditdesk/ToolsAndModels.faces?context=2&detail=135

EMEA Cash Flow Model
http://www.fitchratings.com/web_content/pages/sf/emea-cash-flow-model.htm

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for that asset class is available by accessing the appendix that accompanies the presale report (see " Auburn Securities 9 plc - Appendix ", at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.