40FU Mortimer Btl 53

TIDM40FU

RNS Number : 3720P

Preferred Residential Secs 05-1 PLC

16 November 2016

THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF NOTEHOLDERS. IF NOTEHOLDERS ARE IN ANY DOUBT AS TO THE ACTION THEY SHOULD TAKE, THEY SHOULD SEEK THEIR OWN FINANCIAL AND LEGAL ADVICE, INCLUDING AS TO ANY TAX CONSEQUENCES, IMMEDIATELY FROM THEIR STOCKBROKER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL OR LEGAL ADVISER.

REGULATION (EU) NO 596/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 16 APRIL 2014 (MARKET ABUSE REGULATION) REQUIRES DISCLOSURE BY OR ON BEHALF OF THE ISSUER OF ANY INSIDE INFORMATION CONCERNING THE ISSUER.

IMPORTANT NOTICE TO THE HOLDERS OF THE

Class B1a EUR7,000,000 mortgage backed floating rate notes due 2043

(ISIN: US740378AG98, XS0217637213)

(the "Class B1a Notes")

Class B1c GBP22,600,000 mortgage backed floating rate notes due 2043

(ISIN: US740378AJ38, XS0217069813)

(the "Class B1c Notes")

Class C1c GBP10,800,000 mortgage backed floating rate notes due 2043

(ISIN: US740378AM66, XS0217070076)

(the "Class C1c Notes")

Class D1c GBP15,800,000 mortgage backed floating rate notes due 2043

(ISIN: US740378AQ70, XS0217070829)

(the "Class D1c Notes")

Class E GBP3,400,000 mortgage backed floating rate notes due 2043

(ISIN: US740378AR53, XS0217071041)

(the "Class E Notes")

issued by

PREFERRED RESIDENTIAL SECURITIES 05-1 PLC

(the "Issuer")

on or about 27 April 2005

(the "Transaction")

The Class B1a Notes, Class B1c Notes, Class C1c Notes, Class D1c Notes, Class E Notes are together referred to as the "Notes" and holders of the Notes, the "Noteholders".

Capitalised terms used but not otherwise defined in this notice shall have the meanings ascribed to them in the Master Definitions Schedule dated 27 April 2005 and entered into between, amongst others, the Issuer and the Trustee.

The Issuer and Cash/Bond Administrator, together with their respective legal counsel, have been considering the impact of negative EURIBOR on the Transaction, in particular on the payments between the Issuer and the Swap Counterparty under the B1a Note Swap Agreements (relating to the Class B1a Notes).

Through the operation of the B1a Note Swap Agreement, under the interest legs of the B1a Note swap transaction, the Issuer would usually swap a GBP payment linked to LIBOR in return for a EUR amount linked to EURIBOR. However, the Issuer (as a result of EURIBOR being negative and in the absence of a zero floor on the payment legs between the Issuer and the Swap Counterparty) will not currently receive a EUR amount from the Swap Counterparty and will instead have a payment obligation to the Swap Counterparty equal to the relevant "negative" EUR amount.

The Issuer and its legal counsel have undertaken a review of the relevant provisions of the Documents (which do not explicitly outline the required cash flow operations and payments in such a scenario) with the assistance of the Cash/Bond Administrator and its legal counsel, and they have concluded that there are two alternative interpretations of the terms governing how negative EURIBOR can apply:-

(1) the Issuer, in all circumstances, converts the required amount of GBP revenue receipts (at the then prevailing spot rate) into EUR in order to make a payment to the Swap Counterparty equal to the negative EUR amount under the interest leg of the relevant swap transactions, notwithstanding the operation of the netting provisions in the relevant Swap Agreements. The GBP revenue amounts applied in this manner will effectively result in a lesser amount being paid in respect of Deferred Consideration and potentially also in a reduced Interest Amount being paid on the then most applicable junior notes; or, alternatively

   (2)     in instances, 

a. where no amounts in respect of principal are payable on the relevant EUR Notes and thus no amounts in respect of principal are payable by the Issuer and the Swap Counterparty to each other, the Issuer converts the required amount of GBP revenue receipts (at the then prevailing spot rate) into EUR in order to make a payment to the Swap Counterparty equal to the negative EUR amount under the interest leg of the relevant swap transactions, notwithstanding the operation of the netting provisions in the relevant Swap Agreements. The GBP revenue amounts applied in this manner will effectively result in a lesser amount being paid in respect of Deferred Consideration and potentially also in a reduced Interest Amount being paid on the then most applicable junior notes;

b. where the Issuer is anticipated to receive (prior to netting) an amount in EUR from the Swap Counterparty under the principal leg of the same currency swap transaction and such amount is lower than the absolute value of the negative EUR amount under the interest leg of the relevant swap transactions which the Issuer is required to pay (prior to netting), the Issuer and Swap Counterparty net such positions, resulting in the Swap Counterparty paying a zero amount to the Issuer under the principal leg of the currency swap transaction, resulting in zero amount of principal being repaid to the relevant EUR Noteholders, and the Issuer then converts the required amount of GBP revenue receipts (at the then prevailing spot rate) into EUR in order to make a payment to the Swap Counterparty equal to the remaining outstanding negative EUR amount under the interest leg of the relevant swap transactions. The effect of applying the cashflows in this manner is that there will be a permanent reduction in principal repaid to the relevant EUR Noteholders and the GBP revenue amounts will be applied so as to result in a lesser amount being paid in respect of Deferred Consideration and potentially also in a reduced Interest Amount being paid on the then most applicable junior notes; or

c. where the Issuer is anticipated to receive (prior to netting) an amount in EUR from the Swap Counterparty under the principal leg of the same currency swap transaction and such amount is greater than the absolute value of the negative EUR amount under the interest leg of the relevant swap transactions which the Issuer is required to pay (prior to netting), the Issuer and Swap Counterparty net such positions so that the Swap Counterparty pays a lesser amount of EUR to the Issuer under the principal leg of the currency swap transaction, which is then applied (without any recourse to revenue receipts) in accordance with the Pre-Enforcement Priority of Payments resulting in a permanent reduction in principal repaid to the relevant EUR Noteholders (and no lesser amounts paid in respect of Deferred Consideration or no reduced Interest Amount being paid on the then most applicable junior notes).

Given the lack of certainty in the Documents, the Issuer is unable to definitively determine which interpretation is correct. Therefore the Issuer, together with its legal counsel Reed Smith LLP, is consulting with leading counsel on the interpretation of the relevant provisions and is proposing to seek an English court determination of the correct interpretation.

As the Issuer did not have time, prior to the September 2016 Interest Payment Date, to obtain such clarification it has therefore made payments to Noteholders on the basis of interpretation (1) above, meaning that (as set out in the September 2016 Investor Report) GBP 149.67 of revenue receipts were converted into EUR in order to pay the required negative EUR amounts to the Swap Counterparty under the B1a Note Swap Agreement (relating to the Class B1a Notes).

Noteholders should be aware that once a determination has been sought by the Issuer, if it is determined that interpretation (2) is in fact the correct interpretation, the amounts paid out by the Issuer on the basis of interpretation (1) may need to be reversed and/or rectified.

Noteholders are encouraged to contact the Issuer with any views on this matter.

Queries may be addressed to the Issuer as follows:

Preferred Residential Securities 05-1 Plc

c/o Wilmington Trust SP Services (London) Limited

Third Floor

1 King's Arms Yard

London EC2R 7AF

Attention: The Directors

Telephone: +44 (0) 20 7397 3600

Fax: +44 (0) 20 7397 3601

e-mail: transactionteam@wilmingtontrust.com

Ref: Preferred Residential Securities 05-1 Plc

OR to Reed Smith LLP as follows:

Reed Smith LLP

The Broadgate Tower

20 Primrose Street

London EC2A 2RS

Attention: James Fisher

Telephone: +44 (0)20 3116 3667

e-mail: jfisher@reedsmith.com

This Notice is given by the Issuer.

Dated 16 November 2016

This information is provided by RNS

The company news service from the London Stock Exchange

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November 16, 2016 10:10 ET (15:10 GMT)