DBRS Confirms Orange Lion VII RMBS B.V. Class A Notes at AAA (sf)
RMBSDBRS Ratings Limited (DBRS) has today confirmed its ratings on the Class A1, A2, A3, and A4 Notes (Class A Notes) issued by Orange Lion VII RMBS B.V. (OL VII) at AAA (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.
-- Probability of default (PD), 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 AAA (sf) rating level.
OL VII closed in June 2012 and is a securitisation of prime Dutch residential mortgages originated by ING Bank N.V. Further advances to the borrowers are allowed and approximately 25% of the loans benefit from NHG Guarantees.
The collateral pool is performing within DBRS’s expectations. As of 31 October 2015, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance were at 1.06%, down from 1.51% 12 months earlier. The cumulative foreclosure and the cumulative realised losses as a percentage of the collateral pool balance at the transaction closing remained low at 1.03% and 0.28%, respectively. DBRS maintained the transaction’s PD and LGD assumptions at the B (sf) rating level at 5.75% and 37.38%, respectively.
The credit enhancement available to the Class A Notes increased to 20.3% through transaction deleveraging and is commensurate with the AAA (sf) rating. The source of credit enhancement is the subordination of the Class B Notes.
The amortisation of the Class A Notes is currently sequential, in the order of Class A1, A2, A3, and A4. From and including the August 2017 payment date, the amortisation switches to pro rata among the Class A Notes. The allocation of the principal deficiency ledger is pro rata among the Class A Notes.
ING Bank N.V. (ING) is the Account Bank and the Swap Counterparty in the transaction. ING’s rating (A (high)/R-1) meets the rating requirements given the ratings assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” and “Derivative Criteria for European Structured Finance Transactions” methodologies.
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. These 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 action include the investor reports provided by ING Bank 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 these ratings 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 16 February 2015, when the ratings on the Class A Notes were confirmed at AAA (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 5.75% and 37.38%, respectively. At the AAA (sf) rating level for Class A Notes, the corresponding PD is 28.32% and the LGD is 58.10%.
-- 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 A1 Notes would be expected to be at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A1 Notes would be expected to be at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Classes A1 Notes would be expected to be at A (sf).
Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA(high) (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in PD, expected rating of AA (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf).
Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA(high) (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in PD, expected rating of AA (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf).
Class A3 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA(high) (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in PD, expected rating of AA (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf).
Class A4 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA(high) (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in PD, expected rating of AA (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (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 (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: Konstantine Pastras
Initial Rating Date: 12 June 2012
Initial Rating Committee Chair: Claire Mezzanotte
Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Keith Gorman
DBRS Ratings Limited
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United Kingdom
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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.
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