OREANDA-NEWS. January 19, 2016. Fitch Ratings has affirmed Arkle Master Issuer plc, a prime UK RMBS master trust. A full list of rating actions is at the end of this commentary.

KEY RATING DRIVERS
High Credit Enhancement
Arkle's structure shares subordination and reserve funds across issuances. As of November 2015, credit enhancement (CE) for the class A notes was 50.1%, up from 26.1% 12 months previously. The subordinated B, M and C tranches now benefit from 44.7%, 43.6% and 40.7% CE, respectively, up from 23.3%, 22.8% and 21.2% 12 months ago. The increase follows the full amortisation of some senior notes, most recently in November 2015.

Improved Arrears Performance
A repurchase of GBP194.9m loans more than three months in arrears means that the proportion of borrowers in arrears by more than three months stood at 0.1% in November 2015, down from 1.3% in November 2014. Given the seasoning of the loans, the quality of the collateral and the trust's ability to repurchase loans, Fitch expects arrears to remain limited.

Consistent Underlying Asset Concentrations
The key characteristics of the mortgages in the pool have remained stable since the last issue in February 2012, despite the pool shrinking by GBP9.62bn due to prepayments, amortisation and repurchases. Fitch has found no evidence of negative selection in the current pool in indicators such as the average original loan-to-value ratio, the proportion of interest-only loans, and the level of concentration in London and the South East.

Counterparty Exposure
In its analysis, Fitch tested for excessive counterparty exposure by assessing the effect of the loss of the reserve fund held in a bank account provided by Lloyds Bank plc (A+/F1). Given the current CE and the soft bullet amortisation nature of the notes scheduled to be redeemed during 2016 and 2017, Fitch found there would be no material change in the notes' ratings in the event Lloyds jumps to default.

RATING SENSITIVITIES
Fitch considers the ratings fairly insensitive to increasing stress factors, given the high levels of CE and the strong arrears performance to date. The portfolio demonstrated solid credit characteristics at the last issue date, and in Fitch's view the notes would now be able to withstand the most extreme scenarios without the ratings coming under pressure. The ratings are also not likely to be upgraded due to the flexible structure of the master trust that allows the assets to be removed from the collateral pool and further note issuance backed by the existing asset pool.

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 pool and the transactions. There were no findings that were material to this analysis. 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.

For Arkle 2010-1 and 2010-2 Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions 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.

For Arkle 2012-1 prior to the transaction closing, 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.

For Arkle 2012-1 prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator 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.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Lloyds with a cut-off date of 30 September 2015
- Transaction reporting provided by Lloyds since close and until November 2015

MODELS
The models below were used in the analysis. Click on the link for a description of the model.

ResiEMEA.

EMEA RMBS Surveillance Model.

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Arkle Master Issuer Plc Series 2012-1 New Issue Appendix, dated 14 February 2012 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."

The rating actions are as follows:

Arkle Master Issuer PLC - Issue 2010-1
Series 5 Class A: affirmed at 'AAAsf'; Outlook Stable
Series 5 Class B: affirmed at 'AAsf'; Outlook Stable
Series 5 Class M: affirmed at 'Asf'; Outlook Stable
Series 5 Class C: affirmed at 'BBBsf'; Outlook Stable

Arkle Master Issuer PLC - Issue 2010-2
Series 3 Class A: affirmed at 'AAAsf'; Outlook Stable
Series 4 Class A: affirmed at 'AAAsf'; Outlook Stable

Arkle Master Issuer PLC - Issue 2012-1
Series 3 Class A1 affirmed at 'AAAsf'; Outlook Stable
Series 4 Class A affirmed at 'AAAsf'; Outlook Stable