DBRS Ratings Limited (DBRS) confirmed its AA (high) (sf) rating on the Senior Variable Funding Note (Senior VFN) issued by Rembrandt Dutch Mortgages B.V. (the Issuer).
The rating on the Senior VFN addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Senior VFN to cover the expected losses at the AA (high) (sf) rating level.
The transaction is a secured funding facility provided by Natixis S.A., London Branch (Natixis) to the Issuer, a special-purpose vehicle incorporated under the laws of the Netherlands. Up until the end of the commitment period on 23 August 2019, subject to stop-purchase events, the Issuer can purchase mortgage loans funded through the issuance of the rated Senior VFNs and unrated Junior VFNs.
The VFNs are collateralised by Dutch prime residential mortgage loans originated by Fenerantis B.V. through the brand name Merius. Fenerantis B.V. is part of Credit Management and Investor Solutions B.V. (CMIS Group). The mortgage portfolio is serviced by Fenerantis B.V. through Adaxio B.V.
Since transaction closing in September 2017, no loans have entered the two- to three-month or 90+ arrears buckets and no loans have defaulted.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 8.6% and 22.7%, respectively.
The Senior VFN benefits from a minimum level of credit enhancement of 10.0%, provided via subordination of the Junior VFN.
The transaction benefits from a reserve fund, currently at the target level of EUR 1.8 million. The reserve fund is available to cover shortfalls in payment of senior fees, interest due on the Senior VFN (subject to the mid swaps rate cap) and principal through the principal deficiency ledger mechanism.
ABN AMRO Bank N.V. acts as the account bank for the transaction. Based on the account bank reference rating of ABN AMRO Bank N.V. at AA (low), one notch below the DBRS public Long-Term Critical Obligations Rating of AA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Senior VFN, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “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.
An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.
A review of the amended transaction legal documents has been conducted following an amendment executed in December 2018, whereby Natixis may provide the senior funding up to one month in advance of purchase of the receviables. The junior noteholder is obliged to prefund the margin to be paid on the Senior VFN on the following interest payment date. A review of the remaining 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: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.
The sources of data and information used for this rating include investor reports and loan-level data provided by Fenerantis B.V.
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 purpose 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 31 August 2018, when DBRS confirmed the rating of the Senior VFN.
Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):
-- DBRS expected a lifetime base case PD and LGD for the pool 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 loans for the Issuer are 8.6% and 22.7%, respectively.
-- 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 increases by 50%, the rating of the Senior VFN would be expected to fall to A (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Senior VFN would be expected to fall to A (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Senior VFN would be expected to fall to BBB (low) (sf).
Senior VFN Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 6 September 2017
DBRS Ratings Limited
20 Fenchurch Street
Registered and incorporated under the laws of England and Wales: No. 7139960.
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
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- European RMBS Insight Methodology
-- European RMBS Insight: Dutch Addendum
-- Operational Risk Assessment for European Structured Finance Originators
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.