DBRS Confirms Ratings on Domos 2011, Compartment A Class A1 and Class A2 Notes Following Restructure

DBRS Ratings Limited (DBRS) has today confirmed its rating of AAA (sf) on the Class A1 and Class A2 Notes issued by Domos 2011, Compartment A (Issuer) following a reduction of the General Reserve Fund size and the purchase of an additional housing loan portfolio funded via a further issuance of the Class B Notes. The purpose of the restructure is to maintain ECB eligibility with regards to Article 142 of Guideline ECB n°2014-60.

Post-restructure, the outstanding balance of the Class A1 Notes has remained unchanged at €347,550,000 (as of the April 2015 payment date). The balance of the Class A2 Notes has also remained unchanged at €95,000,000 (as of the April 2015 payment date). The size of the Class B Notes has increased by €30,000,000 to €249,700,000. The General Reserve Fund has decreased by €30,000,000 to €58,825,000 from the initial size of €88,825,000. The post-restructure credit enhancement of the Class A1 and Class A2 Notes has reduced to 44.57% from 46.59% (as of the April 2015 payment date), with credit enhancement provided by subordination of the Class B Notes (36.07% of total note balance) and the General Reserve Fund (8.5% of total note balance). At assignment of the initial ratings, the Class A1 and Class A2 credit enhancement was 33.00%.

The General Reserve Fund is available to cover senior expenses, swap payments, Class A1 interest, Class A2 interest and Class B interest. During the normal redemption period, the required General Reserve Fund balance will be non-amortising at €58,825,000. During the accelerated redemption period, the General Reserve Fund should maintain a minimum balance equal to 1% of the current Class A1, Class A2 and Class B Notes balance. The minimum balance is only available to cover senior expenses, swap payments and interest on the Class A1 and Class A2 Notes. Amounts available above the minimum balance may be used to pay interest on the Class B Notes. The updated size of the General Reserve Fund represents 24% of the subordinated Class B Notes.

As of the 20 July cut-off date, the outstanding balance of the total housing loan portfolio post-purchase is €638,651,850.89 and comprises French residential home loans originated by BNP Personal Finance (Originator or Seller). The portfolio is well seasoned at 70.6 months with a Weighted Average Current Loan to Value of 80.31%, with the maximum LTV at 125% for the loan eligibility criteria of the Compartment A pool. 10.67% of the portfolio comprises buy-to-let loans with 99.67% of the portfolio repaying on a capital plus interest basis.

The weighted-average interest rate of the housing loan portfolio is 2.33% and comprises floating (77.40%) and fixed-rate (22.60%) loans, which pay on a monthly (99.97%) or quarterly (0.03%) basis. Payment on the notes is made semi-annually. Additionally, 27.26% of the portfolio has a cap on the interest rate payable. DBRS calculates the weighted-average capped rate at 4.44%. The floating-rate loans are indexed to 3-month Euribor (77.40%). The potential basis and interest rate risk is hedged via a basis rate swap (to hedge the mismatch of reference rate rates between the assets and liabilities), an interest rate swap (to hedge the fixed-rate loans in the respective portfolio) and a Cash Swap where the counterparty shall pay the Compartment a rate equal to 6-month Euribor minus 2bps and will receive the financial income from the Authorised Investments.

The interest payable on the Class A2 Notes is fixed and consequently there is a Class A2 interest rate swap in place. The swap counterparty will pay 4.32% (interest rate on the Class A2 Notes) to the issuer and the Compartment will pay 6-month Euribor + 1.41%, on a notional balance equal to the Class A2 Notes.

A Commingling Reserve Account was established for Compartment A at the closing date to mitigate the risk of payments by checks by borrowers to each Specially Dedicated Account. The initial cash deposit in the Compartment A Commingling Reserve Account was €3.0 million.

There is a representation and warranty which states that no housing loan agreement contains a provision whereby the borrower is entitled to set-off. BNP PF account bank agreements provide for a contractual clause whereby the customers have agreed to waive set-off rights under the deposits. DBRS assessed the potential set-off risk to the transaction and considered it to be negligible.

DBRS was provided with historical arrears data, reported as a cumulative percentage of loans greater than 90 days in arrears for each origination vintage. The two-year probability of default estimate remains unchanged from the date of the last review at 2.65%. Based on updated recovery data, DBRS increased the recovery lag from 24 to 36 months in its cash flow analysis.

The Confirmation of the Class A1 and Class A2 Notes is based upon the following analytical considerations:

• The transaction cash flow structure and form and sufficiency of available credit enhancement. Credit enhancement available to the Class A1 and Class A2 Notes is in the form of subordination of the Class B Notes and the General Reserve Fund. Post-restructure, DBRS calculated the credit enhancement of the Class A1 and Class A2 Notes at 44.57%. Post-restructure, DBRS calculates the General Reserve Fund balance to equal 8.5% of the total note balance.

• The credit quality of the total mortgage portfolio which secures the Class A1 and Class A2 Notes and the ability of the servicer to perform collection activities. DBRS calculated updated probability of default, loss given default and expected loss outputs on the total portfolio.

• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents. The transaction cash flows were modelled using updated portfolio default rates and loss given default outputs for the total mortgage portfolio provided by the DBRS default model.

• The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology. The purchase of the additional portfolio and further issuance of the Class B Notes has been approved by the Issuer, note holders and all other relevant counterparties to the transaction.

Notes:
All figures are in euros unless otherwise noted. The principal methodology applicable is:

“Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”, 16 July 2015.

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

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of the 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 source of information used for this rating is BNP Paribas S.A.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third party assessments. However, this did not impact the rating analysis.

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 the 3 March 2015, when DBRS confirmed the Class A1 and Class A2 Notes.

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

To assess the impact of 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):

The Probability of Default (PD) of 34.55% and Loss Given Default (LGD) of 51.56% corresponding to a AAA rating scenario, were stressed assuming a 25% and 50% increase on the base case PD and LGD.

DBRS concludes the following impact on the rated Class A1 Notes:

• A hypothetical increase of the PD by 50%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)
• A hypothetical increase of the LGD by 50%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)
• A hypothetical increase of the PD by 25%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)
• A hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would maintain the ratings of the Class A1 Notes at AAA (sf)

DBRS concludes the following impact on the rated Class A2 Notes:

• A hypothetical increase of the PD by 50%, ceteris paribus, would maintain the ratings of the Class A2 Notes at AAA (sf)
• A hypothetical increase of the LGD by 50%, ceteris paribus, would maintain the ratings of the Class A2 Notes at AAA (sf)
• A hypothetical increase of the PD by 25%, ceteris paribus, would maintain the ratings of the Class A2 Notes at AAA (sf)
• A hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the ratings of the Class A2 Notes at AAA (sf)
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the ratings of the Class A2 Notes at AAA (sf)
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the ratings of the Class A2 Notes at AAA (sf)
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would maintain the ratings of the Class A2 Notes at AAA (sf)
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to 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: Keith Gorman
Initial Rating Date: 20 January 2012

Initial Rating Committee Chair: Claire Mezzanotte

Lead Analyst: Asim Zaman
Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Quincy Tang

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

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

Structured Finance Transactions Derivative Criteria for European Structured Finance Transactions
Legal Criteria for European Structured Finance Transactions
Operational Risk Assessment for European Structured Finance Servicers
Unified Interest Rate Model for European Securitisations

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