Rating action

Scope Ratings UK Limited (Scope) has taken the following rating actions:

Class A1 Notes (ISIN XS2134386031): GBP 435,000,000: affirmed at AAA_SF

Class A2 Notes (ISIN XS2134388086): GBP 1,670,000,000: affirmed at AAA_SF

Class B1 Notes (ISIN XS2134388326): GBP 160,000,000: upgraded to AA-_SF from A+_SF under review for developing outcome

Class B2 Notes (ISIN XS2134388912): GBP 160,000,000: upgraded to AA-_SF from A+_SF under review for developing outcome

Transaction overview

The transaction is a GBP 2.9bn true-sale securitisation of loans secured by UK residential properties. The loans were granted in the ordinary course of business by Barclays Private Bank & Overseas Services (PBOS), a private bank division of Barclays Bank PLC. The loans were originated to high-net-worth clients and are denominated in sterling (GBP). The transaction features a reinvestment period during which loans may be exchanged in the portfolio on a discretionary basis, but rules-based reinvestment criteria protect the transaction from adverse portfolio migration.

Rating rationale

The current review addressed i) the collateral’s observed performance and the evolution of its composition during the ongoing reinvestment period, ii) Scope’s economic outlook, and iii) the issuer’s exposure to key transaction parties. In addition, the review resolved the placement ‘under review’ of the class B notes, following the publication of Scope’s new Residential Mortgage-Backed Securities Rating Methodology on 17 July 2024, which introduced a new analytical framework (see here). The current upgrade of the class B notes results from the recalibration of key cash flow model assumptions following the application of the new analytical framework.

The class A notes’ assigned ratings reflect the cash flow model (‘CFM’) base case results. Counterparty risk is immaterial, relative to the assigned rating levels. None of the key rating drivers disclosed below are ESG related.

Key rating drivers

• Robust structure¹. The deal features a strictly sequential structure, and separate principal and interest waterfalls. Since the restructuring of the transaction in 2022, the Class A and Class B notes benefit from 27.4% and 16.4% credit enhancement provided by subordination of the Class C notes. The potential of negative portfolio migration is limited due to adequate portfolio-level covenants as well as a performance-based trigger.
   
• Strong liquidity (positive)¹. Liquidity shortfalls are very unlikely for Class A, as Class A is supported by a non-amortising liquidity facility, consisting of 2% of the initial total collateral balance. In addition, principal proceeds can be diverted to cover Class A interest shortfall risk, in accordance with the transaction’s waterfalls (principal-to-interest). However, liquidity support for Class B is weaker as it is heavily reliant on the liquidity facility, especially in the early life of the transaction. Class B does not benefit from the principal-to-interest mechanism until Class A is fully redeemed.
   
• Volatility of the historical data (negative)². Scope’s lifetime portfolio default rate distribution captures relatively high expected defaults, which reflect the volatility of the historical data which Scope was provided with before closing, as well as underlying refinancing risks owing to the bullet nature of most underlying assets. The coefficient of variation, which is embedded in the default distribution addresses the high regional- and borrower concentration as well as potential adverse portfolio migration within portfolio limits during the reinvestment period.
   
• Uncertain recoveries³. Given the illiquid nature of the financed properties of high-net-worth individuals, recoveries are more uncertain than in other RMBS transactions. There are no observed recoveries available in the context of the transaction, therefore, the class B ratings incorporate the potential impact of recovery scenarios below Scope’s base case.

Key CFM assumptions:

• The portfolio’s lifetime default rate which follows an inverse Gaussian distribution
   
• The stochastic recovery rate from the defaulted assets, which follows a beta distribution

Details on these assumptions and other CFM Parameters are provided under the section ‘Quantitative analysis’ below. CFM assumptions factor in the historical performance of assets of similar nature to those of the securitised portfolio, (e.g. based on originators’ performance data or peer transaction benchmarks), and may as well consider qualitative judgements based on a variety of factors, such as a) the originator’s credit policies, b) Scope’s macro-economic expectations, and c) the credit committee’s asset class outlook over the transaction’s lifetime.

Key data sources:

Scope’s review was based on investor reporting as of October 2024 payment date and portfolio data as of June 2024.

Rating-change drivers

A change to the transaction’s Key CFM Assumptions based on observed performance or new data sources, significant changes to the transaction’s collateral and structural features, and a change in Scope’s credit views regarding the transaction’s Key Rating Drivers could impact the ratings to the downside.

All else equal, the sensitivity analysis below provides an indication of the impact of variations in key CFM assumptions on the CFM quantitative results. The analysis has the sole purpose of illustrating the sensitivity of the credit ratings to such parameters and is not indicative of expected or likely scenarios.

Sensitivity analysis

Scope tested the resilience of the credit ratings against deviations in Key CFM Parameters. All else equal, the following analysis has the sole purpose of illustrating the sensitivity of the credit ratings to such parameters and is not indicative of expected or likely scenarios.

Class A1:

• 50% increase of mean lifetime default rate: 0 notches
   
• a parallel shift by -10 percentage points in the portfolio recovery rate: 0 notches

Class A2:

• 50% increase of mean lifetime default rate: 0 notches
   
• a parallel shift by -10 percentage points in the portfolio recovery rate: 0 notches

Class B1:

• 50% increase of mean lifetime default rate: 0 notches
   
• a parallel shift by -10 percentage points in the portfolio recovery rate: -1 notch

Class B2:

• 50% increase of mean lifetime default rate: 0 notches
   
• a parallel shift by -10 percentage points in the portfolio recovery rate: -1 notch

Quantitative analysis and assumptions

This section provides non-exhaustive list of relevant CFM parameters:

• A cumulative mean default rate assumption of 8.0% and a Distressed Default Rate assumption of 33.7%, implying annualised mean and distressed marginal default rates of 1.4% and 5.7%, respectively.
   
• A beta distribution of recovery rates with a mean recovery rate of 84% and distressed recovery rate of 50.4%.
   
• Base case constant prepayment rate: 15%.
   
• Senior fees and expenses: 0.3%.
   
• Rating conditional interest rate vectors: as disclosed in Scope’s General Structured Finance Methodology.
   
• 2% loss of the portfolio balance until the beginning of the amortization phase.
   
• To determine the Distressed Default Rate: portfolio LTV increasing to 67.5%, share of non-owner-occupied properties increasing to 25%.

CFM assumptions factor in the historical performance of assets of similar nature to those of the securitised portfolio, (e.g. based on peer transaction benchmarks), and may as well consider qualitative judgements based on a variety of factors, such as a) the originator’s credit policies, b) Scope’s macro-economic expectations, and c) the credit committee’s asset class outlook over the transaction’s remaining life.

Rating driver references
1. Transaction documents (Confidential)
2. Historical data from the originator (Confidential)
3. Investor reports and portfolio data (Confidential)

Stress testing
Stress testing was considered in the quantitative analysis by considering scenarios that stress factors, like defaults and recoveries, contributing to sensitivity of Credit Ratings and consider the likelihood of severe collateral losses or impaired cash flows. The impact on the rated instruments is weighted by the assumptions of the likelihood of the events in such scenarios occurring.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction with the use of Scope Ratings’ Cash Flow Model Version 2.0 incorporating relevant asset assumptions and taking into account the transaction’s main structural features, such as the instruments’ priority of payments, the instruments’ size and coupons. The outcome of the analysis is an expected loss rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodologies used for these Credit Ratings (Residential Mortgage-Backed Securities Rating Methodology, 17 July 2024; General Structured Finance Rating Methodology, 6 March 2024; Counterparty Risk Methodology, 10 July 2024; Country Addendum United Kingdom RMBS, 17 July 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings is (Cash Flow Model Version 2.0) available in Scope Ratings’ list of models, published under https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions - Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/uk-regulation. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, the Rated Entities’ Related Third Parties, third parties and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Scope Ratings has received a third-party asset due diligence assessment/asset audit in November 2019 in the context of the transaction’s initial issuance on 27 March 2020. The external due diligence assessment/asset audit was considered when preparing the Credit Ratings and it has no impact on the Credit Ratings.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and the principal grounds on which the Credit Ratings are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings are issued by Scope Ratings UK Limited at 52 Grosvenor Gardens, London, United Kingdom, SW1W 0AU, Tel +44 20 7824 5180. The Credit Ratings are EU-endorsed.
Lead analyst: Adam Plajner, Associate Director
Person responsible for approval of the Credit Ratings: Antonio Casado, Managing Director
The Credit Ratings were first released by Scope Ratings on 27 March 2020. The Credit Ratings assigned to Class A1 and Class A2 were last updated on 24 March 2022. The Credit Ratings assigned to Class B1 and Class B2 were last updated on 8 August 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.