DBRS Assigns Ratings to the Class A Notes Issued by Mercurius Funding N.V. / S.A. (Mercurius-1)

DBRS Ratings Limited (“DBRS”) has assigned a rating of A (low) (sf) to the EUR 3,200,000,000 Class A Asset Backed Floating Rate Notes due April 2035 (the “Class A Notes” or the “Rated Notes”), issued by Mercurius Funding N.V. / S.A. (Compartment Mercurius-1) (the “Issuer”). The Issuer is organised as a Belgian public limited liability company registered as an institutional company for investment in receivables (“Institutional VBS”). The transaction is a cash flow securitisation collateralised by a portfolio of loans granted to self-employed, small and medium sized enterprises (“SMEs”) and corporate borrowers based in Belgium. The loans were originated by Dexia Bank Belgium N.V. - S.A. (the “Originator” or “Belfius”).

As of 31 January 2012 (the “cut-off date”), the provisional pool consisted of 60,546 loans extended to 37,380 individual borrowers or borrower groups totalling EUR 4,228 million. At closing, the Originator will select the final portfolio of up to EUR 4,000 million from the above mentioned provisional pool.

Belfius acts as the Originator and Servicer of the portfolio, and, as such, collects all payments from the borrowers before transferring the proceeds to the issuer account, which is also held by Belfius in its role as Account Bank.

The rating of the Class A Notes is based upon DBRS’s review of the following considerations:
• Transaction structure, the form and sufficiency of available credit enhancement, the portfolio characteristics and the cash trapping mechanisms.
-- The credit enhancement for the Class A Notes is equal to the excess above the outstanding principal of the Class A Notes of the aggregate of (i) the performing asset balance, and (ii) the Reserve Fund. The credit enhancement of the Class A Notes is therefore EUR 924 million or 23.1% of the target portfolio.
-- The Reserve Fund will have an initial balance of EUR 124,000,000 (representing 3.1% of the final portfolio size). The Reserve Fund is available to cover senior expenses and missed interest payments on the Class A Notes as well as amounts on the PDLs throughout the life of the deal.
-- The Principal Deficiency Ledgers (PDLs) will register losses incurred due to defaults on the loan portfolio. This structural feature is beneficial to the Class A Notes as it enables excess cash to be trapped in the interest waterfall until such PDL balances are cured.

• Review of the legal structure and operational capabilities of key transaction participants.

• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the approved terms. Interest and principal payments on the Notes will be made monthly, generally on the 24th day of the month. The first payment date will be 24 July 2012.

• The transaction parties’ financial strength and capabilities to perform their respective duties and the quality of origination, underwriting and servicing practices.

• Soundness of the legal structure and presence of legal opinions which address the true sale of the assets to the issuer and the non-consolidation of the special purpose vehicle, as well as the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the Maturity Date, in April 2035.

The principal methodology is “Master European Granular Corporate Securitisations (SME CLOs)”, which can be found on our website under Methodologies.

The sources of information used for these ratings include the parties involved in the rating, including but not limited to the Originator, Dexia Bank Belgium N.V. - S.A. (“Belfius”) and their agents.

DBRS considers the information available to it for the purposes of providing this rating was of average quality. DBRS adjusted its analysis to account for the quality of information provided. The main limitation was that the historical default performance data provided was based on Belfius’ internal definition of default which differs from the standard of 90 days in arrears definition used. The historical data is used to determine the average annual default rate for SME borrowers which is a key input parameter in DBRS analysis.

Further information on DBRS’s analysis of this transaction will be available in a rating report on http://www.dbrs.com, or by contacting us at info@dbrs.com.

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

This is the first DBRS rating on this financial instrument.

For additional information on DBRS European SME CLO(s), please see European Disclosure Requirements, located at http://www.dbrs.com/research/235269.

Lead Analyst: Carlos Silva
Rating Committee Chair: Jerry van Koolbergen
Rating Date: 7 May 2012

Note:
All figures are in Euros unless otherwise noted.