56KE Sthn.pac 4b

• THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF THE REGISTERED AND BENEFICIAL OWNERS OF THE NOTES. ALL DEPOSITARIES, CUSTODIANS AND OTHER INTERMEDIARIES RECEIVING THIS NOTICE ARE REQUESTED TO PASS THIS NOTICE TO THE BENEFICIAL OWNERS IN A TIMELY MANNER. IF NOTEHOLDERS ARE IN ANY DOUBT AS TO THE ACTION THEY SHOULD TAKE, THEY SHOULD CONSULT THEIR OWN INDEPENDENT PROFESSIONAL ADVISERS AUTHORISED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000 (IF THEY ARE IN THE UNITED KINGDOM) OR ANOTHER APPROPRIATELY AUTHORISED INDEPENDENT FINANCIAL ADVISER AND TAKE SUCH OTHER ADVICE FROM THEIR OWN PROFESSIONAL ADVISERS AS THEY DEEM NECESSARY, IMMEDIATELY.

IMPORTANT NOTICE TO THE HOLDERS OF THE

£31,500,000 Class M Mortgage Backed Floating Rate Notes due 2042

(ISIN: XS0186714506, US84359TAB35)

(the "Class M Notes")

£6,000,000 Class B Mortgage Backed Floating Rate Notes due 2042

(ISIN: XS0186715222)

issued by

Southern Pacific Securities 04-1 PLC

(the “Issuer”)

on or about 26 February 2004

The "Class B Notes", and together with the Class M Notes, the "Notes".

Capitalised terms in this Notice shall, except where the context otherwise requires or save where otherwise defined herein, bear the meanings ascribed to them in the master definitions schedule dated 26 February 2004 between, amongst others, the Issuer and Capita Trust Company Limited (the “Trustee”) (as amended and restated from time to time) (the "Master Definitions Schedule").

On 9 June 2015 the short term unsecured debt rating of Barclays Bank PLC ("Barclays") was downgraded by S&P from "A-1" to "A-2" (the "S&P Downgrade"). Barclays is the GIC Provider, the Account Bank and the Collection Account Bank for the Transaction.

As a result of the S&P Downgrade, Barclays no longer has the relevant requisite ratings set out in the relevant transaction documents, including the Bank Agreement, the Cash/Bond Administration Agreement or the GIC (the "Relevant Documents").  The Issuer, the Cash/Bond Administrator and/or Barclays, as applicable, are required to take certain remedial action following the S&P Downgrade, as set out in the Relevant Documents.

In light of the recent downgrading of the ratings of certain of the Notes by S&P, the Issuer would like to provide an update on the status of the remedial actions which have been, and which are being, taken by the Issuer and/or the Cash/Bond Administrator (acting on behalf of the Issuer) in connection with the S&P Downgrade.  The Issuer, having been informed of the facts herein by the Cash/Bond Administrator (and not having independently verified the information contained in this notice), hereby notifies Noteholders of the following:

1. Background to the remedial action
   1. Following the S&P Downgrade, the Cash/Bond Administrator, on behalf of the Issuer and in its capacity as the Cash/Bond Administrator, undertook a market review and entered into discussions with five financial institutions that met the Rating Agencies’ minimum counterparty criteria to perform the relevant roles to ascertain whether one of them would be suitable to be appointed as replacement Account Bank, GIC Provider or the Collection Account Bank (as applicable).
2. Update on the remedial action in relation to the GIC and the Transaction Account

Following the completion by the Cash/Bond Administrator of its market review to find a suitable replacement, the Cash/Bond Administrator notified the Issuer and the Trustee that it has identified a global banking institution as a potential suitable replacement to replace Barclays as the GIC Provider and the Account Bank for the GIC Account and the Transaction Account (the "Transaction Account Bank"). The specific terms for the appointment are currently still being discussed between the Cash/Bond Administrator, the Issuer and the prospective replacement bank; however in the expectation that commercial agreement will be reached, it is intended that the appointment will be finalised as soon as practicable. The Cash/Bond Administrator and the Issuer are seeking to keep the commercial and legal terms as consistent as possible to those terms currently in place with Barclays, but it should be noted that there may be differences required to reflect commercial and legal changes that have taken place in the market since the original bank agreement was entered into with Barclays, in particular it being noted that some differences are required to be implemented (resulting in potentially lower interest rates to take into account increased regulatory costs) as a result of the implementation of such changes, the finalisation of these necessary changes has unfortunately led to a delay to execution of the relevant legal documentation whilst the impact of such changes are being confirmed and finalised.

1. Update on the remedial action in relation to the Collection Accounts
   1. Despite having conducted its market review and having had discussions with financial institutions, the Cash/Bond Administrator has not been able to find a suitably rated financial institution who is willing to be the replacement account bank for the Collection Accounts (the "Collection Account Bank").  In relation to the suitably rated financial institutions that were able to offer collection account services, most were deterred by the significant efforts involved in setting up collection account banking operations, together with the economics of operating such accounts. The financial institutions were also concerned with the potential risks, such as direct debit indemnity liability, involved in operating collection accounts in transactions of this type and at this stage of maturity.
   2. As a result, the Cash/Bond Administrator has advised the Issuer that there is currently no viable alternative but to retain Barclays in the role of Collection Account Bank and to lower the rating requirements of the Collection Account Bank in the Relevant Documents to match Barclays' current rating. The Cash/Bond Administrator understands that this approach may be possible on the basis that Barclays currently meets each Rating Agency’s published minimum counterparty rating criteria for the Collection Account Bank role and is therefore able to continue to support a transaction with a "AAA" rated note.
   3. Barclays have communicated to the Cash/Bond Administrator that they are prepared to remain in their Collection Account Bank role provided that they are able to amend their fee structure.  They have asked that the current tariffs, which are based largely on numbers of items processed, are replaced with a fixed fee structure (including an annual charge), and if such changes are agreed and implemented, this will result in higher Collection Account Bank charges.
   4. Barclays considers that these increased fees are necessary to offset the risks of operating the Collection Accounts, against the economics of performing the Transaction Account Bank and GIC Provider roles. The Trustee is not required to consent to the increase in fees charged by Barclays as the Transaction Documents already allow for the increase to be implemented.
   5. Barclays have communicated to the Cash/Bond Administrator that they will require that it remains as a Secured Creditor under the Deed of Charge in its capacity as the Collection Account Bank and therefore rank in the relevant Priority of Payments at the same level as it does as the existing Account Bank.  The New Transaction Account Bank (when selected) will accede to the Deed of Charge to become a Secured Creditor and to also rank at the same level as Barclays currently does in its capacity as Account Bank.
2. Except to the extent the Trustee’s consent is required under the Transaction Documents to implement the replacement of Barclays as Account Bank and GIC Provider and to retain Barclays as Collection Account as a result of the S&P Downgrade, in accordance with normal practice, the Trustee expresses no opinion as to the merits of the steps taken by the Cash/Bond Administrator or the Issuer (as applicable) as described in this Notice. It has, however, authorised it to be stated that, on the basis of the information set out in this Notice, it has no objection to the Notice being sent to the Noteholders. The Trustee has, however, not been involved in preparing this Notice and makes no representation that all relevant information has been disclosed to Noteholders in this Notice.

The Issuer will keep the Noteholders updated on developments in respect to the proposed remedial actions.

Queries may be addressed to the Issuer as follows:

Southern Pacific Securities 04-1 PLC

4^th Floor

40 Dukes Place

London EC3A 7NH

Attention:        The Directors

Telephone:       +44 203 367 8200

Fax:                 +44 203 170 0246

e-mail:             spvservices@capitafiduciary.co.uk

Ref:                 Southern Pacific Securities 04-1 PLC

This notice is given by the Issuer.

Dated 4 February 2016