DBRS Confirms Ratings to TS Lago One GmbH - Class A Notes

DBRS Ratings Limited (“DBRS”) has reviewed TS Lago One GmbH (the “Issuer”) and confirms the rating to Class A Notes at ‘AAA’ (sf).

TS Lago One GmbH is a German securitisation of prime mortgages originated and serviced by Commerzbank. The transaction is backed by a portfolio EUR 6.49 billion of residential, multi-family and to a smaller extent commercial mortgage loans. The transaction initially closed in December 2008.

Confirmation of the ratings for the Class A Notes is based upon the following analytical consideration, as described more fully below:

• Portfolio performance, in terms of level of delinquencies, as of the 27 January 2014 payment date.
• Current available credit enhancement to Class A Notes to cover the Expected Losses at respectively, the ‘AAA’ (sf) rating level.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.

The current 90+ delinquency ratio as a percentage of the performing balance of the portfolio has remained at 0% since the close of the transaction. This is due to Commerzbank AG (the “Seller”) repurchasing all the loans being delinquent for more than 90 days to date, resulting in a cumulative defaults percentage of zero. Since the transaction closing date, the Seller has repurchased 4.18% of the original collateral balance.
Unlike the vast majority of European RMBS transactions, the Issuer does not have a Principal Deficiency Ledger mechanism that allows for excess spread to be used to cover possible losses suffered on sale of underlying loans. Therefore, any losses suffered by the transaction will erode credit enhancement. Current credit enhancement to the Class A Notes is 33.73% formed by the subordination of the Class B Notes with a balance of EUR 2.2 billion.

The transaction has a 364 day Liquidity Facility that can be renewed at the Liquidity Facility Provider’s option every year. If the Liquidity Facility Provider (currently Commerzbank AG) elects not to renew the facility then a stand-by drawing is to be made. The Liquidity Facility is sized at 4% of the aggregate principal amount of underlying loans and has a floor of 2% of the underlying loans as at the date the transaction initially closed. At last payment date the amount of this liquidity fancily was at the floor of EUR 292 million.

Commerzbank AG holds the Treasury Account for the transaction. The DBRS private ratings of Commerzbank AG complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodology applicable is the Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by Commerzbank AG. and data from the European DataWarehouse. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 22 February 2013, when DBRS assigned the rating of ‘AAA’ (sf) to Class A Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current receivables. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
• The base case PD and LGD of the current pool of mortgages for the Issuer are 7.16% and 35.91%, respectively. The corresponding levels at the ‘AAA’ (sf) rating level are 28.86% and 73.01%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of Class A Notes would be expected to remain at ‘AAA’ (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain to ‘AAA’ (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating would be expected to decrease to ‘AA (high)’ (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of ‘AAA’ (sf)
• 50% increase in LGD, expected rating of ‘AAA’ (sf)
• 25% increase in PD, expected rating of ‘AAA’ (sf)
• 50% increase in PD, expected rating of ‘AAA’ (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of ‘AAA’ (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of ‘AA (high)’ (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of ‘AA (high)’ (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of ‘AA (high)’ (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

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

Initial Lead Analyst: Alastair Bigley
Initial Rating Date: 22 February 2013
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 22 February 2013

Lead Surveillance Analyst: Dylan Cissou
Rating Committee Chair: Claire Mezzanotte

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies

• Legal Criteria for European Structured Finance Transactions
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
• Unified Interest Rate Model for European Securitisations