DBRS Confirms Rating of Candide Financing 2007 NHG B.V.

DBRS Ratings Limited (DBRS) has today confirmed its A (high) (sf) rating to the Class A Notes of Candide Financing 2007 NHG B.V. (Candide 2007 NHG or the Issuer). Candide 2007 NHG is a securitisation of Dutch mortgages originated by Bank of Scotland PLC, Amsterdam branch which benefit from an NHG Guarantee. The Issuer appointed Stater to provide day-to-day administration management services on the mortgages.

Confirmation of the rating is based upon the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the 22 September 2014 payment date;
-- Current available credit enhancement to the Class A Notes to cover the Expected Losses at the A (high) (sf) rating level;
-- Updated Portfolio Default Rate, Loss Given Default and Expected Loss for the remaining collateral pool.

The current 90+ delinquency ratio as a percentage of the performing balance of the portfolio has been low since the close of the transaction and is currently equal to 1.49%. The cumulative default ratio is also very low, equal to 1.04%.

Credit enhancement to the Class A Notes is provided by subordination of the unrated Class B Notes and the Cash Reserve. Current credit enhancement as a percentage of the performing balance of the portfolio for the Class A Notes is 4.00%. The Cash Reserve is non-amortising with a target balance equal to 0.50% of the original balance of the Class A Notes and Class B Notes. The current Cash Reserve balance is EUR 5.35 million, just over the current target amount.

The updated analysis of the collateral includes an adjustment to the Loss Given Default (LGD) and Expected Loss (EL) to incorporate the benefit of the NHG Guarantee. This resulted in a decrease in the Base Case LGD reduction from 36.28% to 7.3% and a Base Case EL reduction from 0.49% to 0.1%. The decrease in the LGD for the A (high) (sf) scenario was from 50.38% to 20.8% and corresponding EL reduction from 4.95% to 2.0%.

Bank Nederlandse Gemeenten NV (BNG) is the GIC Provider for the transaction. Bank of Scotland plc, Amsterdam branch is the swap counterparty for the transaction. The DBRS private rating of BNG is above the Minimum Institution Rating given the rating assigned to the Class A Notes as described in the DBRS Legal Criteria for European Structured Finance Transactions. Additionally, DBRS’s public rating of Bank of Scotland PLC, Amsterdam branch complies with the DBRS Derivative Criteria for European Structured Finance Transactions.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is DBRS’s Master European Structured Finance Surveillance Methodology. 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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include periodic investor reports provided by ATC Financial Services 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 11 February 2014 when the ratings to the Class A Notes were confirmed.

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 mortgages. 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 for the current pool of mortgages for the Issuer are 1.34% and 7.3%, respectively. The corresponding levels at the A (high) (sf) rating category are 9.82% and 20.8%.

• The Risk Sensitivity 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 the Class A Notes would be expected to remain at A (high) (sf), assuming no change to the PD. If the PD increases by 50% the rating for the Class A Notes would be expected to remain at A (high) (sf), assuming no change to the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to attain A (sf).

Class A Risk Sensitivity:
-25% increase in LGD, expected rating of A (high) (sf)
-50% increase in LGD, expected rating of A (high) (sf)
-25% increase in PD, expected rating of A (high) (sf)
-50% increase in PD, expected rating of A (high) (sf)
-25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-50% increase in PD and 50% increase in LGD, expected rating of A (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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: Keith Gorman
Initial Rating Date: 21 June 2011
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 9 February 2015

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Diana Turner

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