OREANDA-NEWS. March 28, 2016. Fitch Ratings says that the restructuring of Mercia No. 1 plc will not have a rating impact on the programme's notes.

On 24 March 2016 the issuer publicly announced a number of proposed changes. We have conducted an analysis of the proposed changes and do not expect the changes to have a rating impact on Mercia No. 1 plc's (Mercia) existing rated notes (Class A1 and Class A2; both rated 'AAAsf').

The notes are backed by buy-to-let (BTL) residential mortgage loans originated in England and Wales by Godiva Mortgages Limited (Godiva; unrated), a wholly owned subsidiary of Coventry Building Society (CBS; 'A'/Stable/'F1'). 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 and Mercia No. 1 plc has been one of the better-performing UK BTL pools with arrears, repossessions and losses in line or better than its peers.

Following the restructuring, credit enhancement (CE) for the class A notes will be 19.8% compared to 12.0% at the closing of the transaction in 2012. The CE is provided by the subordination of the unrated class Z VFN (16.4%) as well as a fully funded reserve fund (3.4%).

The changes in the restructure include:
- Sale of GBP462.2m mortgages, which were selected on a random and representative basis, to Godiva for the issuance of the Offa No. 1 plc transaction. After the sale the current balance of Mercia will be GBP1.097bn
-Pro-rata pay down of Class A1 and Class A2 notes with the proceeds received from the sale. There will be no reduction in the class Z VFN or the Reserve Fund
-Extension of the revolving period by four years, from 31st December 2016 to 31st December 2020