DBRS Confirms Ratings on Record Lion NV/SA-Compartment RMBS I
RMBSDBRS Ratings Limited (DBRS) has today confirmed the ratings on the following notes issued by Record Lion NV/SA-Compartment RMBS I (Record Lion I):
-- Class A1 confirmed at AAA (sf)
-- Class A2 confirmed at AAA (sf)
The confirmation of the ratings on the Class A1 and A2 notes is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and default, as of January 2016.
-- Portfolio probability of default (PD) rate, loss given default (LGD) and expected losses for the remaining collateral pool.
-- Current available credit enhancement to the senior Class A1 and A2 notes to cover the Expected Losses at the AAA (sf) rating level.
Record Lion I closed in November 2011 and is a securitisation of first-ranking Belgium residential mortgages originated and serviced by Record Bank NV (fully owned by ING Belgium SA/NV).
As of January 2016, loans in two- to three-month arrears were at 0.49%, and loans in more than three-month arrears were at 0.99% of the outstanding collateral pool balance. The cumulative defaults, as a percentage of the initial pool balance at the transaction closing plus the replenishment amounts during the revolving period, increased to 4.86%. The cumulative realised losses were at 0.14% with a recovery rate of 94.49%. The transaction’s performance is within DBRS’s expectations and DBRS has maintained the PD and LGD assumptions in this rating review.
The credit enhancement to the Class A1 and A2 notes as a percentage of the outstanding portfolio balance has increased to 36.74% through the transaction’s deleveraging. The credit enhancement is provided by the subordination of the Class B notes and the non-amortising Reserve Fund, currently at its target amount of EUR 80.67 million.
The transaction has a 364-day Liquidity Facility that can be renewed at the option of ING Belgium SA/NV every year. It will be used for meeting any shortfalls in the payments to senior fees and interest due on the Class A1 and A2 notes. The Liquidity Facility is sized at 1.75% of the Principal Outstanding of the Notes. As of the February 2016 payment date, the amount of this liquidity facility was at EUR 36.093 million.
ING Belgium SA/NV acts as Account Bank and Swap Counterparty to this transaction. The DBRS private rating on ING Belgium SA/NV complies with the rating requirement given the ratings assigned to the Class A1 and A2 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: “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. These 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 commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/
The sources of information used for this rating include investor reports provided by ING Belgium SA/NV and the loan by loan 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 A2 notes at AAA (sf).
Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.
To assess the impact of the 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 2.78% and 21.20%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.23% and the LGD is 50.21%.
-- 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 remain at AAA (sf).
Class A1 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 AAA (sf)
Class A2 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 AAA (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: 17 November 2011
Initial Rating Committee Chair: Claire Mezzanotte
Lead Surveillance Analyst: Kevin Ma
Rating Committee Chair: Quincy Tang
DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model for European Securitisations
A description of how DBRS analysis structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375
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