DBRS Confirms and Removes from UR Positive Rating on Notes Issued by Mercurius Funding N.V. / S.A.

DBRS Ratings Limited (DBRS) has today confirmed its A (high) (sf) rating on the €2,460,303,616.00 Class A (ISIN: BE0002469444) notes (the Notes) issued by Mercurius Funding N.V. / S.A. (Compartment Mercurius-1) (the Issuer).

The transaction is a cash flow securitisation collateralised by a portfolio of bank loans originated by Belfius Bank N.V./S.A. (Belfius or the Originator) to small and medium-sized enterprises (SMEs) and self-employed individuals based in Belgium. The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before April 2035.

The rating action reflects an annual review of the transaction. The Class A Notes are amortising and are at 76.88% of their initial balances. Given this deleveraging, the current credit enhancement available has increased moderately, while the transaction performance is in line with DBRS’s expectations. The confirmation also takes into account the counterparty risk of the transaction due to the fact that Belfius acts as servicer and account bank provider, also holding the reserve fund.

The current rating actions concludes the review of the Class A Notes, placed Under Review with Positive Implications on 7 April 2015 because of material updates to the methodology DBRS uses to rate and monitor CLOs and CDOs backed by debt of larger corporations (see “Rating CLOs and CDOs of Large Corporate Credit” published 7 April 2015).

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)”, which can be found on the DBRS website under Methodologies at http://www.dbrs.com/about/methodologies.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

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 Mercurius Funding NV/SA, Belfius and other public sources.

DBRS does not rely upon third-party due diligence in order to conduct its analysis; however, Agreed upon Procedures (AUP) are included in the requested documentation.

DBRS was not supplied with AUP documents/audit documents. Data checks were performed and DBRS did not apply additional cash flow stresses in its scenarios.

DBRS considers the information made available to it for the purposes of providing this rating to have been 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 previous rating action on this transaction took place on 7 April 2015, when the rating of the Notes was placed Under Review with Positive Implications. Prior to that, on 13 May 2014, DBRS assigned a rating of A (high) (sf) to the Class A notes (ISIN: BE0002469444) and discontinued-repaid the rating on the Class A Notes (ISIN: BE0002414861).

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):
-- Probability of default (PD) rates used: base case PD of 2.4%, and a 10% and 20% increase in the base case PD.
-- Recovery rates used: base case recovery rates, corresponding to a recovery rate of 38.9% at the A (high) (sf) stress level, and a 10% and 20% decrease in the base case recovery rates.

DBRS concludes that either a hypothetical increase of the base PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would each lead to a confirmation of the Class A Notes at A (high) (sf). A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the recovery rate by 10% would also lead to a confirmation of the Class A Notes at A (high) (sf).

For further information on DBRS’s 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.

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

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

Initial Lead Analyst: Carlos Silva
Initial Rating Date: 13 May 2014
Initial Rating Committee Chair: Jerry Van Koolbergen

Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Jerry Van Koolbergen

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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
-- Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for U.S. and European Structured Credit
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

A description of how DBRS analyses structured finance transactions and how its methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.