OREANDA-NEWS. Fitch Ratings has downgraded Provide GEMS 2002-1 Plc's class E notes and affirmed the others, as follows:

Class B (XS0145701289) affirmed at 'AAAsf'; Outlook Stable
Class C (XS0145701792) affirmed at 'BBsf'; Outlook Stable
Class D (XS0145701875) affirmed at 'Csf'; Recovery Estimate revised to 50% from 40%
Class E (XS0145702170) downgraded to 'Dsf' from 'Csf'; Recovery Estimate 0%

The review of this transaction follows a review of the data input into the model for the transaction. However, the rating actions are not driven by the results of the data review.

The transaction is a synthetic securitisation of second-lien mortgage loans originated by Rheinische Hypothekenbank, now part of Hypothekenbank Frankfurt AG (A-/Negative/F1).

KEY RATING DRIVERS
Improved Performance
Fitch has not received new performance data since its review in July 2015. Over the past 12 months, the performance of the underlying assets in the portfolio has improved. The volume of credit events has reduced to 12.8% from 21.3% of the current portfolio. More than half of the credit events were removed from the portfolio due to ineligibility with the transaction representations and warranties, while the remaining credit events were subject to a sale of the underlying properties.

All loans are second ranking claims with loan-to-value ratios (LTV) in excess of 60%. Consequently, it is not unusual that loss severities are reported at 90% on a cumulative basis. According to different rating scenarios, Fitch assumed between 0% and 10% recoveries on the outstanding and any future credit events. The credit enhancement available to the class B and C notes is sufficient to sustain the relevant rating stresses as reflected in their affirmation.

Exposure to Loss Allocation
As of June 2015 the class D notes had allocated losses of 21.5%. While Fitch believes that further losses are likely to be allocated to these notes, the agency expects that about half of the outstanding class D notes amount can still be repaid. This is reflected in the revision of their Recovery Estimate to 50% from 40%.

Meanwhile, losses were allocated to the full outstanding balance of the class E notes. The agency considers the write-down to be irreversible. Late recoveries and funds from unjustified loss allocations are not expected to be sufficient to write the notes up in full. Thus, the rating on the class E notes has been downgraded to 'Dsf' with a Recovery Estimate of 0%.

Operational Risk
Fitch has not been provided with current full information on the servicing operations, structure or strategies for this transaction. Nevertheless, Fitch believes that the performance of the pool, its seasoning and the good quality of investor reports provided by Hypothekenbank Frankfurt AG, mitigates this risk. The agency has not extended its dialogue since June 2015 given the unresponsiveness of the servicer.

RATING SENSITIVITIES
A sudden deterioration in asset performance that leads to credit events and losses for the structure beyond Fitch's assumptions would put pressure on credit enhancement, particularly at the bottom end of the structure.

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 transaction. 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.

Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction 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.

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 Hypothekenbank Frankfurt AG as at May 2015
- Transaction reporting provided by Hypothekenbank Frankfurt AG as at May 2015
- Discussions/updates from servicer as at 10 June 2015

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


ResiEMEA.