DBRS Assigns Ratings to Record Lion NV/SA-Compartment Record Lion RMBS I Notes

DBRS Ratings Limited (DBRS) has today assigned ratings to the Class A1 and Class A2 notes issued under Record Lion NV/SA-Compartment Record Lion RMBS I (Record Lion, issuer) as shown below:
•AAA (sf) rating to the Class A1 notes aggregating EUR928,250,000, paying a margin of 1.45% over 3 months Euribor;
•AAA (sf) rating to the Class A2 notes aggregating EUR1,115,500,000, paying a margin of 1.75% over 3 months Euribor;

The Class B notes, which are junior to the above class of notes, are not rated by DBRS.

Record Lion is a securitisation of a portfolio of first ranking Belgian residential mortgages funded by the issuance of three classes of mortgage-backed notes. The mortgages were originated and will be serviced by Record Bank NV (Record Bank). This is the first issuance of pass-through mortgage-backed notes by Record Bank.

The rating is based upon review by DBRS of the following analytical considerations:

•The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination and excess spread, if available. The Class A1 is the most senior class of notes in the structure but shares a principal deficiency ledger with Class A2 notes. Both these class of notes are thus supported by a subordinated Class B notes (24%) and a fully funded and non-amortising reserve fund (3%). While principal is paid sequentially, interest payments on Class A1 and Class A2 are on a pro rata and pari-passu basis. Any shortfalls in payment of senior fees and interest on Class A1 and Class A2 notes are supported by a non-amortising liquidity facility (1.75%).

•The Record Lion mortgage portfolio will be revolving until February 2015. The Issuer will purchase new loans from Record Bank subject to specific eligibility and replenishment conditions. These conditions would limit the change in credit risk profile of the mortgage portfolio during the revolving period.

•Most of the loans in the mortgage portfolio pay a variable rate of interest with fixed periods ranging from one year to 15 years (98.9%). The index on these variable rate loans are set by the National Bank of Belgium. Rest of the loans (1.1%) pay a fixed rate of interest for their entire tenure. In comparison the interest of the notes are linked to 3 months Euribor. Record Lion envisages a swap to hedge this basis risk.

•The credit quality of the mortgages backing the notes and ability of the Servicer to perform collection activities on the mortgages.

•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.

•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.

Note:
All figures are in EUR unless otherwise noted.

The principal methodologies applicable are Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda, Legal Criteria for European Structured Finance Transactions and Swap Criteria for European Structured Finance Transactions which can be found on www.dbrs.com.

The sources of information used for this rating include data relating historical performance and repossession data from Record Bank and performance history of publicly rated Belgian RMBS deals and mortgage default and house prices’ statistics from National Bank of Belgium. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is a newly created financial instrument.

This is the first DBRS rating on this financial instrument.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

For additional information on these ratings, please refer to the linking document.

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: November 17, 2011