DBRS Confirms Rating on Essence IV B.V.

DBRS Ratings Limited (DBRS) has today confirmed its rating on the following bonds issued by Essence IV B.V. (the Issuer):

-- Senior Class A Mortgage-Backed Fixed Rate Notes at AAA (sf) (the Class A Notes)

The confirmation of the rating on the Class A Notes is based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of November 2015.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Essence IV B.V. is a securitisation of Dutch prime residential mortgages originated or acquired by NIBC Bank B.V. (NIBC) and its subsidiaries. On 1 November 2015, NIBC completed the mergers of its mortgage subsidiaries into three remaining entities — Hypinvesthypotheken B.V., Quion 30 B.V. and HypInvest B.V. — with no impact on the Issuer. The mortgage portfolio is being serviced by NIBC with Stater Nederland B.V., and Quion Hypotheekbemiddeling B.V. and Quion Services B.V. are assuming the role of subservicers.

As of November 2015, two- to three-month arrears were at 0.36%, and the 90+ delinquency ratio was at 1.17%. The current cumulative default ratio is low at 1.05%.

As of October 2015, credit enhancement to the Class A Notes was 18.55%, up from 9.91% at transaction close on 1 March 2011. Credit enhancement to the Class A Notes consists of subordination of the Class B Notes and the Reserve Fund.

The transaction benefits from a Reserve Fund that is available to cover senior fees as well as interest and principal shortfall (via the principal deficiency ledger) on the Class A Notes. The Reserve Fund is currently at the target level of EUR 2,675,924.66 and is permitted to amortise under certain conditions.

ABN AMRO Bank N.V. acts as account bank for this transaction. The DBRS public rating of ABN AMRO Bank N.V. at “A” complies with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Master European Structured Finance Surveillance Methodology,” which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. DBRS conducted a review of the merger deeds of the Sellers, as well as the relevant articles of association, in order to assess the impact of the amendment to the transaction. The other transaction legal documents have remained unchanged since the most recent rating action, and were not reviewed.

The sources of information used for this rating include reports provided by NIBC Bank N.V. and data from the European DataWarehouse.

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 3 February 2015, when DBRS confirmed the Class A Notes at AAA (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

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):
-- 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 assets. 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 1.92% and 33.60%, respectively. At the AAA (sf) rating level, the corresponding PD is 24.92% and the LGD is 52.34%.
-- 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 the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to AA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AA (high) (sf).
-- 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AA (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (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 (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: Richard Hewitt
Initial Rating Date: 1 March 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Andrew Lynch
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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United Kingdom
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 (September 2015)
-- Master European Structured Finance Surveillance Methodology (December 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (December 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (January 2016)
-- Unified Interest Rate Model for European Securitisations (October 2015)

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