DBRS Assigns Ratings to the Class A Notes Issued by Belgian Lion NV / SA

DBRS Ratings Limited (“DBRS”) has assigned a rating of AAA (sf) to the EUR 2,286,500,000 Class A1 and EUR 2,489,500,000 Class A2 Asset Backed Floating Rate Notes due November 2039 (the “Class A Notes”), issued by Belgian Lion NV / SA (Compartment Belgian Lion SME II) (the “Issuer”). 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 ING Belgium NV / SA (“ING”).

ING acts as the Swap Counterparty, Originator, Servicer and the Manager 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 ING in its role as Account Bank (GIC Provider).

The Manager will use the replenishment period (ending in February 2015) to reinvest available proceeds as per the replenishment, portfolio and eligibility criteria. As of 31 May 2012, the pool consisted of 63,622 loans extended to 28,152 individual borrowers or borrower groups, totalling EUR 6,238 million. At closing, the Issuer will deposits part of the proceeds from the issuance of the total Notes (EUR 6,587 million) in the Further Drawdown Account to cover for any undrawn amounts in relation to any loans that have not been fully drawn down by the relevant borrowers.

DBRS analysis was based on a theoretical worst case portfolio taking into consideration the obligor type, industry and region concentration limits presented in the replenishment criteria.

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 and the portfolio characteristics based on the replenishment conditions.
-- The credit enhancement for the Class A Notes is equal to the excess above of 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 1,960 million or 30.50%.
-- The Reserve Fund will have a balance of EUR 197,625,000 (representing 3% of the portfolio size). The Reserve Fund is available to cover senior expenses, missed interest payments on the Class A Notes and Issuer’s payment obligations under the Principal Deficiency Ledgers (“PDLs”) of Class A Notes.
-- The PDLs will register losses incurred due to defaults on the loan portfolio. Under the Swap Agreement, the Swap Counterparty (ING) will receive all collected proceeds minus the senior expenses and return the Issuer the interest due and payable on the Notes in that period minus the PDL balances. This structural feature is not considered beneficial to the Class A Notes as it eliminates the possibility of trapping any excess cash in the interest waterfall. DBRS factored such structural features in its ratings analysis.

• 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 quarterly, generally on the 10th day of February, May, August and November. The first payment date will be 12 November 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 November 2039.

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 Issuer, the Originator and their agents.

DBRS considers the information available to it for the purposes of providing this rating was of average quality. DBRS combined the effects of the historical default performance data provided and conditions set in the replenishment criteria to calculate a base case 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: Mudasar Chaudhry
Rating Committee Chair: Jerry van Koolbergen
Rating Date: 14 August 2012

Note:
All figures are in Euros unless otherwise noted.