DBRS Ratings Limited (DBRS) assigned a provisional rating of AAA (sf) to the Class A notes to be issued by Green Apple 2019-I NHG B.V. (Green Apple 2019-I or the Issuer), a securitisation collateralised by a portfolio of Dutch residential mortgage loans granted by Argenta Spaarbank N.V. (Argenta or the Originator) in the Netherlands. All of the loans in the provisional portfolio are backed by a Nationale Hypotheek Garantie.
The Issuer is expected to issue two tranches of mortgage-backed securities (Class A and Class B notes) to finance the purchase of Dutch residential mortgage loans secured over properties located in the Netherlands. Additionally, Green Apple 2019-I is expected to issue Class C notes, which are non-collateralised and whose proceeds will be used to fund the Reserve Fund and to cover initial costs and expenses.
The provisional rating addresses the timely payment of interest and the Issuer’s obligation to repay principal on the Class A notes by the Legal Final Maturity Date in January 2058. DBRS does not rate the Class B or the Class C notes. The coupon on the Class A notes will be three-month Euribor plus 0.40%. From the payment date falling in January 2026, the coupon will be capped at 5.40%. Any excess of three-month Euribor over 5% will then be payable as a subordinated additional interest amount. The additional interest amounts are not rated by DBRS.
Credit support to the Class A notes is sized at 13.3% and is provided by subordination and a non-amortising Reserve Fund. The Reserve Fund is expected to be funded at 1.3% to an amount of EUR [8.9] million. Liquidity support for the Class A notes is further provided through a Cash Advance Facility along with principal being borrowed to support revenue items with a corresponding debit to the appropriate principal deficiency ledger. The Cash Advance Facility will amortise with no performance conditions attached. It is expected to be sized at the maximum of 1.5% of the Class A and Class B notes’ outstanding balance with a floor of 1% of the Class A and Class B notes’ balance as of the closing date. The Cash Advance Facility is a 364-day contract, and if it is not renewed, it will be drawn by the Issuer.
As of 30 April 2019, the provisional portfolio consisted of 8,899 loans extended to 6,029 borrowers with an aggregate principal balance of EUR 968.1 million. The mortgage loans in the asset portfolio are all classified as owner-occupied and are secured by a first-ranking mortgage right. The provisional portfolio contains 13.4% interest-only loans, and 3.9% of the loans were granted to self-employed borrowers. All mortgage loans are performing as of the cut-off date.
Within the provisional mortgage portfolio, 98.6% of the loans currently pay a fixed rate of interest with the most common reset frequencies of ten and 20 years. In comparison, the notes pay an interest rate linked to three-month Euribor, which resets on a quarterly basis. The Issuer’s fixed-floating risk exposure is hedged through an interest rate cap agreement that references the aggregate current balance of the Class A notes with an amortisation based on 4.5% p.a. (the cap notional amount) and pays the Issuer the positive difference between the three-month Euribor and the cap strike rate multiplied by the cap notional amount. The Interest Rate Cap Agreement is only effective up to but excluding the first optional redemption date, which is in January 2026. As of the same date, the coupon on the Class A notes is also capped so that no incremental exposure to interest rate risk arises.
The mortgages were originated by and serviced by Argenta, with Quion Services B.V. acting as sub mortgage payment transactions provider.
DBRS based its rating primarily on the following analytical considerations:
-- The transaction capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- The credit quality of the mortgage portfolio and the ability of the servicer to perform collection and resolution activities. DBRS calculated probability of default (PD), loss given default (LGD) and expected loss outputs on the mortgage portfolio, which are used as inputs into the cash flow tool. The mortgage portfolio was analysed in accordance with DBRS’s “European RMBS Insight Methodology” and the “European RMBS Insight: Dutch Addendum".
-- The transaction’s ability to withstand stressed cash flow assumptions and repay investors in accordance with the Terms and Conditions of the notes. The transaction structure was analysed using Intex Dealmaker.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer.
All figures are in euros unless otherwise noted.
The principal methodologies applicable to the ratings are the European RMBS Insight Methodology and the European RMBS Insight: Dutch Addendum.
DBRS has applied the principal methodologies consistently and conducted a review of the transaction in accordance with the principal methodologies.
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 historical performance (default, loss and prepayment data) and loan-level data provided by ABN AMRO Bank N.V. and its representatives on behalf of Argenta.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
DBRS was supplied with one or more 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.
This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.
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):
In respect of the Class A notes, the PD and LGD at the AAA (sf) stress scenario of 16.12% and 13.64%, respectively, were stressed assuming a 25% and 50% increase on both the PD and LGD.
DBRS concludes the following impact on the Class A notes:
-- 25% increase of the PD, ceteris paribus, would not lead to a rating change
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to AA (low) (sf)
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (sf)
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf)
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf)
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf)
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (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 Limited are subject to EU and US regulations only.
Lead Analyst: Rehanna Sameja, Senior Vice President
Rating Committee Chair: Gareth Levington, Managing Director, Credit Standards
Initial Rating Date: 4 June 2019
DBRS Ratings Limited
20 Fenchurch Street, 31st Floor,
London EC3M 3BY United Kingdom
Registered and incorporated under the laws of England and Wales: Company No. 7139960
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Derivative Criteria for European Structured Finance Transactions
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- European RMBS Insight: Dutch Addendum
-- European RMBS Insight Methodology
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 firstname.lastname@example.org.
This press release was amended on 25 June 2020 to remove an incorrect reference to a methodology and add the two principal methodologies to the methodology list.