DBRS Ratings GmbH (DBRS) confirmed its AAA (sf) rating on the Class A2 Notes issued by Belgian Lion NV/SA-Compartment Belgian Lion RMBS II (the Issuer).
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of February 2019 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions for the outstanding collateral pool; and
-- The current credit enhancement (CE) available to the Class A2 Notes to cover the expected losses at the AAA (sf) rating level.
The rating on the Class A2 Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in November 2047.
Belgian Lion RMBS II is a securitisation of first-ranking Belgian residential mortgages originated and serviced by ING Belgium SA/NV (ING). The transaction closed in July 2012 when the Class A1, Class A2 and Class B Notes were issued. The Class A1 Notes were repaid in full on 25 August 2017. The transaction included a revolving period, which terminated in January 2015.
The portfolio is performing well and within DBRS’s expectations. As of January 2019, loans more than 90 days delinquent accounted for 0.4% of the outstanding collateral pool balance, unchanged from January 2018. The cumulative losses as a percentage of the aggregate of the initial pool balance and the additional receivables purchased during the revolving period slightly increased to 0.08% from 0.05% in January 2018.
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the PD and LGD assumptions on the remaining collateral pool to 19.1% and 49.4%, respectively, at the AAA (sf) rating level.
CE to the Class A2 Notes is provided by the overcollateralisation given by the outstanding collateral portfolio and the non-amortising reserve fund. As of January 2019, CE to the Class A2 Notes was 31.1%, up from 16.0% at closing. The reserve fund is available to cover any shortfall in payment of senior fees and interest on the Class A2 Notes as well as absorbing any losses debited to the Class A principal deficiency ledger. The reserve fund is currently at its target level of EUR 129.1 million.
ING is the Account Bank for the transaction. Based on the reference private rating of the Account Bank, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to the Account Bank to be consistent with the ratings assigned to the Class A2 Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
ING is the Swap Counterparty for the transaction. DBRS’s private rating of the Swap Counterparty is consistent with the First Rating Threshold as defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “Master European Structured Finance Surveillance Methodology”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for this rating include investor and cash flow reports provided by ING and loan-by-loan data from the European DataWarehouse GmbH.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 15 March 2018 when DBRS confirmed its AAA (sf) rating on the Class A2 Notes.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
-- DBRS expected a base case PD and LGD for the portfolio based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and, therefore, have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of mortgages for the Issuer are 1.3% and 28.2%, respectively. At the AAA (sf) rating level, the corresponding PD is 19.1% and the LGD is 49.4%.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf).
Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Ilaria Maschietto, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 8 April 2014
DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Interest Rate Stresses for European Structured Finance Transactions
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Derivative Criteria for European Structured Finance Transactions
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at email@example.com.