DBRS Rates E-Arena B.V.

DBRS Ratings Limited (DBRS) has today assigned a final rating of “AAA” (sf) to the Class A notes issued by E-Arena B.V. E-Arena B.V. has issued two classes of mortgage-backed floating rate notes (Class A and Class B). DBRS rates Class A notes only. The Class A notes are backed by fixed and floating rate, first lien, mortgage loans. The loans were originated by Stichting Financieringen Delta Lloyd to employees of Delta Lloyd Services B.V. and to employees of Delta Lloyd N.V. Owing to the fact that borrowers can retain their loan following the cessation of their employment with any Delta Lloyd group company, at close there are approximately 23% loans to borrowers that are no longer employees of the Delta Lloyd group of companies.

As the loans are concentrated to employees of Delta Lloyd group companies, the transaction is exposed to risks that other, more diversified, RMBS transactions are not. The most significant risks are, firstly, the risk of prolonged industrial action by employees leading to negative asset performance. Given the scale of past industrial activity within the Netherlands, and specifically within the finance sector, DBRS believes the risk to the transaction to be limited. The second risk is of an originator default causing sudden and widespread borrower distress and attempting to exercise set off. DBRS is of the opinion that the level of credit enhancement, the fact that the borrowers are diversified throughout the Netherlands and through Delta Lloyd Group’s hierarchy means that the possibility of reemployment is sufficient. Furthermore, there is a liquidity facility that can be used to pay interest shortfall.

The transactions ratings are based on:

•Transaction capital structure and form and sufficiency of available credit enhancement.
•Relevant credit enhancement is in the form of excess spread (if any), subordination and the cash reserve.
•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to terms in which they have invested.
•The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.
•The credit quality of the collateral and ability of the servicers to perform collection activities on the collateral.
•The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

DBRS credit analysis is performed on a loan-level basis and includes a probability of default and loss given default assessment, an originator- and servicer-specific historical performance review, an analysis of loan default data, and finally a cash flow analysis based on various stresses to prepayments, timing of defaults and recoveries and interest rates.

DBRS applied penalties to borrowers who have been in arrear in the past, borrowers whose primary income was missing, mortgages with an optional repayment, mortgages flagged as second home and mortgages whose purpose was different than purchase.

Note:
All figures are in Euro unless otherwise noted.

The applicable methodologies are Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda, Legal Criteria for European Structured Finance Transactions, Unified Interest Rate Model Methodology for European Securitisations and Swap Criteria For European Structured Finance Transactions which can be found on our website under Methodologies, with adjustments made for the Dutch mortgages.

The sources of information used for this rating include working papers and data on the Dutch economy and housing market. DBRS conducted an operational review on the origination and servicing practices of Stichting Financieringen Delta Lloyd and Delta Lloyd Bank. Stichting Financieringen Delta Lloyd provided loan-level data and historical performance of mortgage portfolio dating back to 2000. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This rating concerns a newly issued financial instrument.

This is the first DBRS rating on this financial instrument.

For additional information on this rating, please refer to the linking document located below.

Lead Analyst: Alastair Bigley
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: 09 August 2011