DBRS Ratings Limited (DBRS) assigned a rating of AAA (sf) to the Class A notes issued by Sinopel 2019 B.V.
The rating addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in July 2061. DBRS does not rate the Class B notes.
Sinopel 2019 B.V. is a public securitisation of prime residential mortgages originated by Triodos Bank N.V. (Triodos) secured over properties in the Netherlands. Triodos is a bank with an underlying mission to lend in a way that adds environmental or social value. The securitised mortgages have interest rates linked, among other things, to the energy label on the property. Triodos is the named servicer, but delegates primary servicing to Stater Nederland B.V.
As of 1 June 2019, the closing mortgage portfolio aggregated to EUR 840.8 million with a weighted-average coupon of 2.3% and a seasoning of 2.5 years. The original (OLTV) and indexed current loan-to-value (CLTV) ratios were 74.7% and 59.0%, respectively.
Around two-thirds (66.6%) of the portfolio has an energy rating of “A” or is classified as energy-neutral. As consumers seek to reduce their environmental impact, properties with better energy efficiency are more likely to experience greater demand, potentially leading to increased valuations. These homes are also likely to have materially lower monthly energy costs, increasing disposable income and reducing the probability of default. This aspect of the lending criteria which rewards greater energy efficiency is viewed as credit positive and has been incorporated into the analysis.
The transaction is structured to initially provide 5.0% of credit enhancement to the Class A notes, provided only through subordination of the Class B notes.
The cash advance facility can be drawn down to cover shortfalls of senior fees and interest on the Class A notes. The available draw amount of the facility at closing is EUR 7,987,000 – equal to 1% of the initial balance of the Class A notes. As the Class A notes amortise, the facility size will reduce to a floor of EUR 4,792,200 – 0.6% of the initial balance of the Class A notes.
A principal deficiency ledger, split into the Class A and Class B sub-ledgers, will record any realised loss up to a maximum of the outstanding balances of the respective notes. This mechanism allows excess spread to be captured to recover any future potential losses, which would otherwise have been released to the seller as deferred consideration.
Monthly mortgage receipts are deposited into the collections account at Triodos on the last day of the month via direct debit. The funds credited to the collection account are swept into the account bank around two weeks later. DBRS has stressed this potential commingling risk from the default of Triodos before collections have been swept to the account bank by removing one month of principal and interest receipts. Coöperatieve Rabobank U.A. (Rabobank) is the account bank and cash advance facility provider for the transaction. Rabobank has a DBRS Long-Term Issuer Rating of AA and a long-term Critical Obligations Rating (COR) of AAA. If the Long-Term Issuer Rating falls below “A” or the Long-Term COR falls below A (high), the account bank will be replaced by, or obtain a guarantee from, an appropriately rated institution within 30 calendar days. The current rating and replacement provisions are consistent with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.
All figures are in euros unless otherwise noted.
The principal methodologies applicable to the rating 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: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.
The sources of data and information used for this rating include Triodos and Rabobank.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
DBRS was 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.
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 these ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the base case).
DBRS expected a base case portfolio default rate (PD) and loss given default (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 receivables at AAA (sf) are 17.0% and 25.8%, respectively.
For example, if the LGD increases by 50%, the rating of the Class A notes would be expected to decrease to AA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A notes would be expected to decrease to AA (low) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to decrease to A (low) (sf), ceteris paribus.
Class A notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of 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: Matt Albin, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 19 July 2019
DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- 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 Methodology
-- European RMBS Insight: Dutch Addendum
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.