DBRS Assigns Ratings to Belgian Lion NV/SA-Compartment Belgian Lion RMBS II Notes

DBRS Ratings Limited (DBRS) has today assigned ratings to the Class A1 and Class A2 notes issued under Belgian Lion NV/SA-Compartment Belgian Lion RMBS II (Belgian Lion II, issuer) as shown below:
• AAA (sf) rating to the Class A1 notes aggregating EUR1,293,500,000, paying a margin of 1.45% over 3 months Euribor;
• AAA (sf) rating to the Class A2 notes aggregating EUR1,934,250,000, 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.

Belgian Lion II 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 are serviced by ING Belgium SA/NV (ING Belgium). This is the second issuance of pass-through mortgage-backed notes by ING Belgium.

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, a reserve fund of 3.5% of the initial balance of the Class A1, Class A2 and Class B notes 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 (12.5%) and the fully funded and non-amortising reserve fund. The reserve fund supports any shortfalls in payment of senior fees and interest on Class A1 and Class A2 notes as well absorbing any losses debited to the Class A principal deficiency ledger. While principal is paid sequentially, interest payments on Class A1 and Class A2 are on a pro rata and pari-passu basis.

• The Belgian Lion II mortgage portfolio will be revolving until February 2015. The Issuer will purchase new loans from ING 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.

• The majority of the loans in the mortgage portfolio pay a fixed rate of interest (77% of mortgage portfolio) and the rest pay variable interest with the interest reset periods ranging from one year to 10 years. The index for the reset of interest rate on these loans is set by the National Bank of Belgium (NBB). In comparison the interest of the notes are linked to 3 months Euribor. This basis risk exposure of the issuer is hedged by a basis swap provided by ING.

• All loans in the mortgage portfolio are secured by a mortgage inscription and a mortgage mandate. DBRS has not given any credit to the mortgage mandate as these are not enforceable by the issuer. DBRS has also included the current balance of pari-passu loans, not part of the mortgage portfolio, in its assessment of default probability and losses at the loan level.

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

• The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.

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

• 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
• Legal Criteria for European Structured Finance Transactions
• Swap Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European RMBS Servicers
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include data relating historical performance & repossession data from ING, 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.

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

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

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: July 9, 2012