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The following is a press release from Moody's Investors Service: GBP 190 million of debt securities affected London, 22 July 2010 -- Moody's Investors Service announced today the following rating actions on notes issued by Metrix Funding No.1 plc. Issuer: Metrix Funding No 1 Plc ....GBP32M Class C-1 Notes, Baa2 Placed Under Review for Possible Downgrade; previously on Sep 21, 2009 Downgraded to Baa2 ....EUR56.2M Class C-2 Notes, Baa2 Placed Under Review for Possible Downgrade; previously on Sep 21, 2009 Downgraded to Baa2 ....GBP36M Class D-1 Notes, B1 Placed Under Review for Possible Downgrade; previously on Sep 21, 2009 Downgraded to B1 ....EUR50.3M Class D-2 Notes, B1 Placed Under Review for Possible Downgrade; previously on Sep 21, 2009 Downgraded to B1 ....GBP30M Class E-1 Notes, Downgraded to Caa3 and Placed Under Review for Possible Downgrade; previously on Sep 21, 2009 Downgraded to Caa2 ....EUR27.03M Class E-2 Notes, Downgraded to Caa3 and Placed Under Review for Possible Downgrade; previously on Sep 21, 2009 Downgraded to Caa2 ....US$3M Class E-3 Notes, Downgraded to Caa3 and Placed Under Review for Possible Downgrade; previously on Sep 21, 2009 Downgraded to Caa2 This transaction which closed in December 2005 is a cash collateralised loan obligation of largely UK corporate loans. The internal ratings assigned to the borrowers by the originator HSBC Bank plc are used to determine the default probabilities of the borrowers in this transaction. These internal ratings are converted to Moody's rating scale according to a mapping. According to the latest trustee report (June 2010), the outstanding portfolio totalled GBP 992 million, consisting of 173 loans made to 52 borrowers, and there was GBP 96.3 million equivalent in the principal collection accounts. There is one delinquent loan with a notional of GBP 0.7 million and a further 11.5% of the portfolio is mapped to a Moody's equivalent rating of Ca. The replenishment period ended in November of 2009, since then the portfolio is static and the Class A notes have amortised by 54%. The WAL of the current portfolio is approximately 1.9 years. The ratings of Classes B,C,D and E were downgraded in September 2009. Today Moody's places on review for possible downgrade Class C and D and also downgrades and leaves under review the Class E notes to reflect significant credit deterioration of the underlying portfolio. This is observed through a decline in the average credit rating as measured through the portfolio weighted average rating factor 'WARF' which in the June 2010 report was 2247 compared to the 1524 of the last rating action (September 2009). According to the June 2010 trustee report, in the past year roughly 17.7% of the loans have experienced a downgrade from the internal HSBC rating scale. Moody's also considered various sensitivity analysis, including reducing the recovery rate by 50% on the loans which are currently carrying a rating close to default according to HSBC (8.1%). The sensitivity analysis showed that different assumptions in terms of recovery could materially affect the rating of the mezzanine and junior tranches. In addition, for the majority of the underlying referenced assets, the equivalent Moody's ratings used in our analysis are obtained through a mapping process between the originator's internal rating scale and Moody's public rating scale. To compensate for the absence of credit indicators such as ratings reviews and outlooks in mapped ratings, a half notch stress was applied to the mapping scale. Because this mapping was performed more than two years ago, an additional stress was applied to capture potential deviations from the established mapping. The global correlation was also increased to reflect the high level of geographical concentration of the underlying loans which are all originated by HSBC. This is in line with the change in assumptions that Moody's announced in two press releases titled "Moody's updates key assumptions for rating CLOs", published on 4 February 2009 and "Moody's Updates its Key Assumptions for Rating Corporate Synthetic CDOs," published on 15 January 2009. The revision affected the default probability and the correlation which are key parameters in Moody's model for rating CDOs exposed to corporate assets. Moody's monitors this transaction using primarily the methodology and its supplements as described in Moody's methodology paper below: --Moody's Approach to Rating Collateralized Loan Obligations (August 2009) --Moody's Approach to Rating CDOs of SMEs in Europe (February 2007) This report can be found at www.moodys.com in the Research and Ratings directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating these issuances can also be found in the Ratings Methodologies subdirectory. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck. 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Any publication into Australia of this document is by MOODY'S affiliate, Moody's (MORE TO FOLLOW) Dow Jones Newswires July 22, 2010 12:10 ET (16:10 GMT)