RMAC Securities No.1 Plc notes upgraded as Barclays rating lifts cap

Traders Union
All News
Financial News
RMAC notes upgraded after Barclays review

Highlights

Fitch upgrades class A2, A3, M1, M2, and B1 notes in several RMAC Securities deals after Barclays Bank plc's rating rises to AA-, lifting the notes' rating cap.
Arrears peak in March 2024 amid inflation and rate pressure, then stabilize with all five deals staying below the Fitch UK non-conforming index; structural tail risks persist due to pro-rata amortisation.
Credit enhancement builds as reserve funds remain intact and loans get term extensions, but upgrade potential for mezzanine and junior tranches is limited by restructured exposures and the Barclays-linked rating cap.

Rating cap change drives note upgrades

As reported by Fitch Ratings, the agency upgrades the class A2, A3, M1 and M2 notes across the Series 2006-NS1, 2006-NS2, 2006-NS3, 2006-NS4 and 2007-NS1 transactions, as well as the class B1 notes in Series 2006-NS1. The related rated currency swap obligations also receive corresponding rating actions under Fitch's global structured finance criteria.

The transactions securitise buy-to-let and non-conforming residential mortgages originated by Paratus AMC, formerly GMAC-RFC. Fitch says the upgrades follow the increase in Barclays Bank plc's Long-Term Issuer Default Rating to AA-, because the notes are capped at the transaction account bank's deposit rating and the cash reserves held there are the main source of structural credit enhancement.

Fitch says the heavy dependence on the transaction account bank remains central to the rating outcome. If collateral performance weakens while pro-rata payment conditions are still met, the reserve fund may remain the only reliable source of credit enhancement, keeping the ratings tied to Barclays' credit strength.

Performance remains stable but structural risks persist

Fitch says arrears peak in March 2024 after two years of pressure from high inflation and rising interest rates, then stabilise. Since the previous review in October 2025, early- and late-stage arrears increase in 2006-NS1, 2006-NS2 and 2006-NS3, while 2006-NS4 and 2007-NS1 show declines in early-stage arrears; across all five deals, arrears remain below the Fitch UK non-conforming index.

The agency also points to continued tail risk from pro-rata amortisation and the absence of a mandatory switch to sequential amortisation in later stages. High shares of interest-only loans, including concentrated maturities in 2026-2027 and 2031-2032, add uncertainty over borrowers' ability to make bullet repayments.

Credit enhancement continues to build because the notes are still paying on a pro-rata basis and reserve funds are non-amortising due to performance trigger breaches. Fitch says rising numbers of matured loans receiving term extensions across all pools, especially in 2006-NS1 and 2006-NS2, are treated as restructured exposures in its analysis, limiting upgrade potential for mezzanine and junior tranches.

On sensitivity, Fitch says weaker asset performance, lower recoveries or a weaker economic environment could trigger downgrades. Stable or improved delinquency and default trends could support higher credit enhancement and further upgrades, although many notes remain constrained by the Barclays-linked rating cap.

Our earlier coverage of Fitch’s outlook revision on JPMCC 2021-1MEM highlighted rising pressure on the commercial mortgage deal as occupancy at One Memorial Drive falls sharply after a major tenant exit, increasing leasing risk. The note outlooks were moved to Negative on concerns about re-leasing the vacant space and the potential impact if the largest tenant leaves at lease expiry, even as sizeable reserves underpin recovery expectations for the top-rated tranche.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.