OREANDA-NEWS. Fitch Ratings has assigned OFFA NO. 1 PLC's notes a final rating, as follows:

Class A floating-rate notes: 'AAAsf', Stable Outlook
Class Z Variable Funding Note: Not rated

The transaction is a public issue with a portfolio of GBP462,182,794 randomly selected assets that were encumbered in Mercia No. 1 plc. The transaction pool is representative of the assets in Mercia No. 1 and comprises low loan-to-value (LTV), prime buy-to-let (BTL) mortgages originated by Godiva Mortgages Ltd (Godiva).

KEY RATING DRIVERS
BTL Exposure to Rate Rises
Sectors with a fairly high proportion of interest-only mortgages, such as the UK BTL market, will be more exposed to interest rate rises. Also, Fitch stresses the default rates of BTL pools beyond those of a prime owner-occupied pool at all rating levels.

Prime Portfolio
The portfolio consists of prime mortgages with a high weighted average (WA) seasoning of 58 months, a low WA original LTV of 54.8%, a low indexed WA current LTV of 40.8% and a high WA income-coverage-ratio of 130.7% (calculated using Fitch's interest rate assumption plus the stabilised margin on the underlying mortgages). The proportion of loans concentrated in Greater London and the south east is 57.2%.

Underwriting and Operational Framework
Godiva is the intermediary lending arm of Coventry Building Society (CBS, A/Stable/F1), which originates mortgages using the same underwriting standards and operational framework as CBS, with the same staff. The differences between the platforms lie in the specific products. Godiva focuses predominantly on prime low LTV BTL lending to non-member borrowers in the intermediary market, whereas CBS focuses on the prime owner- occupied residential space to borrowers who are predominantly members of CBS.

Hedging in Place
A balance-guaranteed swap is in place to hedge the fixed rate (39.3%), tracker rate (5.1%, linked to the Bank of England base rate), and administered rate (55.6%) linked loans on the underlying mortgages against the note payments that are linked to three-month Libor. The swap is provided by Godiva and guaranteed by CBS, whose creditworthiness meets Fitch's counterparty criteria.

Strong Performance
Godiva's mortgage book is one of the stronger-performing UK BTL books among UK prime lenders in terms of static three-months plus arrears. The portfolio for this transaction has been selected from assets securitised through Mercia No.1, a retained transaction by Godiva and one of the better-performing UK BTL pools with arrears, repossessions and losses in line or better than its peers.

RATING SENSITIVITIES
Material increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels larger than Fitch's base case expectations, which in turn may result in negative rating action on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency and a 30% decrease in the WA recovery rate would have no impact on the class A notes' 'AAAsf' rating.

More detailed model implied ratings sensitivity can be found in the presale 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
Fitch conducted a review of a small targeted sample of Godiva'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.

Overall, Fitch's assessment of the asset pool 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 Godiva as at 29 February 2016
-Loan performance data provided by Godiva as at 31 December 2015
-Loan enforcement details provided by Godiva as at 31 December 2015