Press Release

DBRS Confirms Ratings on Belgian Lion NV/SA-Compartment Belgian Lion RMBS II

RMBS
March 18, 2016

DBRS Ratings Limited (DBRS) has today confirmed its ratings of AAA (sf) on the Class A1 and Class A2 notes (together, the Class A Notes) issued by Belgian Lion II NV/SA (the Issuer).

The confirmation of the ratings of the Class A Notes is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of 31 January 2016.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Belgian Lion RMBS II is a securitisation of first-ranking Belgian residential mortgages originated and serviced by ING Belgium SA/NV. The structure included a revolving period terminated in January 2015 and the Class A1 notes started to amortise on 25 February 2015.

The transaction is performing within DBRS’s expectation. As of 31 January 2016, the cumulative default ratio (as a percentage of the original balance of the portfolio) stands at 1.35%. The 90+ delinquency ratio as a percentage of the performing balance of the portfolio remained stable over the year and is currently at 0.49%.

The credit enhancement to the Class A Notes has increased to 19.46% as of the February 2016 payment date from 16.20% as of the February 2015 payment date. Credit enhancement to the Class A Notes is provided by subordination of the Class B Notes and a non-amortising reserve fund. The Class A1 notes is the most senior class of notes in the structure but shares a principal deficiency ledger with Class A2 notes. The reserve fund is available to cover any shortfalls in payment of senior fees and interest of the Class A Notes as well as absorbing any losses debited to the Class A Notes principal deficiency ledger and it is currently at the initial and target level of EUR 129.12 million. While principal is paid sequentially, interest payments on Class A1 and Class A2 notes are on a pro rata and pari passu basis.
ING Belgium SA/NV holds the Treasury Account for the transaction. The DBRS private rating of ING Belgium SA/NV is at least equal to 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. ING Belgium SA/NV also acts as hedging counterparty for the transaction. The DBRS private rating of ING Belgium SA/NV complies with the applicable DBRS Derivative Criteria.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”.

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.

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 sources of information used for this rating include information provided by ING Belgium SA/NV, and data from the European DataWarehouse GmbH.

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 10 April 2015, when DBRS confirmed the ratings on the Class A1 and Class A2 notes at AAA (sf).

The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

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 LGD for the pool based on a review of the current receivables. 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 2.78% and 41.87%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.23% and the LGD is 58.97%.
-- 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A1 notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating on the Class A1 notes would be expected to fall to AA (high) (sf).

Class A1 notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class A2 notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: Kali Sirugudi
Initial Rating Date: 9 July 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Antonio Di Marco
Rating Committee Chair: Mary Jane Potthoff

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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 (February 2016)
-- 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)
-- Derivative Criteria for European Structured Finance Transactions (February 2016)

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.

Ratings

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  • U = UK endorsed
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