DBRS Confirms Candide Financing 2007 NHG B.V. Class A Notes at A (high) (sf)

DBRS Ratings Limited (DBRS) has today confirmed the rating on the Class A Notes issued by Candide Financing 2007 NHG B.V. (Candide 2007) at A (high) (sf).

Today’s rating action is based on the following analytical considerations, as described more fully below:

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

Candide 2007 closed in December 2007 and is a securitisation of Dutch residential mortgages originated by Bank of Scotland Plc, Amsterdam Branch (BoS) with the benefit of an NHG Guarantee. DBRS assigned A (high) (sf) rating to the Class A Notes in June 2011.

The collateral pool is performing as DBRS expected. As of 30 November 2015, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance remained stable at 1.27%. The cumulative default and the cumulative net losses realised as a percentage of the collateral pool balance at the transaction closing remained low at 1.06% and 0.21%, respectively.

DBRS conducted a loan-by-loan analysis on the remaining collateral pool cut as of 30 November 2015, incorporating the benefits of NHG guarantees. Following the analysis, DBRS updated the transaction’s probability of default (PD) and loss given default (LGD) assumptions at the B (sf) rating level to 1.42% and 8.04% respectively.

The credit enhancement available to the Class A Notes increased to 5.3% through transaction deleveraging and is commensurate with the A (high) (sf) rating. The source of credit enhancement is a reserve fund currently at its target level. The reserve fund is funded by the issuance of the Class B Notes at the transaction closing and does not amortise.

N.V. Bank Nederlandse Gemeenten is the Account Bank and BoS is the Swap Counterparty in the transaction. BoS’s DBRS private rating meets the swap counterparty rating requirement given the rating assigned to the Class A Notes, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

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.

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

A review of the transaction legal documents was not conducted, as the documents have remained unchanged since the most recent rating action.

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 sources of information used for this rating include the investor reports provided by Intertrust Management B.V. and the loan-by-loan 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 11 February 2015, when the Class A Notes rating was confirmed at A (high) (sf).

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):

-- DBRS expected a lifetime base case PD and 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 1.42% and 8.04%, respectively. At the A (high) (sf) rating level for Class A Notes, the corresponding PD is 10.25% and the LGD is 20.72%.

-- 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 on the Class A Notes would be expected to be at A (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to be at A (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Classes A Note would be expected to be at BBB (high) (sf).

Class A Note Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in LGD, expected rating of A (sf).
-- 25% increase in PD, expected rating of A (high) (sf).
-- 50% increase in PD, expected rating of A (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: 21 June 2011
Initial Rating Committee Chair: Claire Mezzanotte

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.

-- Unified Interest Rate Model for European Securitisations
-- 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
-- Derivative Criteria For European Structured Finance Transactions

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.