DBRS Confirms Rating on B-ARENA NV/SA, COMPARTMENT N°3

DBRS Ratings Limited (DBRS) has today confirmed the rating of AAA (sf) on the Class A2 Notes issued by B-ARENA NV/SA, COMPARTMENT N°3 (the Issuer).

The confirmation of the rating on the Class A2 Notes is based on the following analytical considerations as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the July 2016 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A2 Notes to cover the expected losses at the AAA (sf) rating level.

B-ARENA NV/SA, COMPARTMENT N°3 is a securitisation of Belgian prime residential mortgages originated by Banque Nagelmackers S.A. and serviced by both Banque Nagelmackers S.A. and its sub-agent Stater Belgium NV.

As of July 2016, two- to three-month arrears were at 1.36%, up from 1.08% in July 2015. The 90+ delinquency ratio was equal to 0.28%, up from 0.21% in July 2015. The current cumulative default ratio is low at 0.04%

As of July 2016, credit enhancement to the Class A2 Notes was 35.66%. Credit enhancement to the Class A2 Notes consists of subordination of the Class B Notes and a reserve fund.

The transaction benefits from a reserve fund that is available to cover senior fees, interest shortfall and principal shortfall (via the Principal Deficiency Ledger) on the Class A2 Notes. The reserve fund is currently at the target level of EUR 10.00 million and is not permitted to amortise.

The transaction also benefits from an amortising liquidity reserve that is available to cover senior fees and interest shortfall on the Class A2 Notes. The liquidity reserve is currently at its target level of EUR 11.90 million (2.5% of the outstanding Class A and Class B Notes balance), and is subject to a floor of EUR 10.00 million.

BNP Paribas Fortis SA/NV is the account bank for the transaction. The DBRS private rating of BNP Paribas Fortis SA/NV complies with the Minimum Institution Rating given the rating assigned to the Class A2 Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transaction” methodology.

The Royal Bank of Scotland plc (RBS) is the swap counterparty for the transaction. The DBRS Long-Term Critical Obligations Rating of RBS is “A,” meeting the DBRS First Rating Threshold given the rating assigned to the Class A2 Notes as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. As the swap documentation does not include DBRS Rating Thresholds, cash flow analysis for the Class A2 Notes included scenarios where the transaction did not benefit from the swap. In these scenarios, the available credit enhancement to the Class A2 Notes was sufficient to cover DBRS expected losses at the AAA (sf) rating level.

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.

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” found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include investor reports provided by Intertrust Administrative Services B.V. (the “Cash Manager”) 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 to be 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 2 October 2015, when DBRS confirmed the rating on the Class A2 Notes at AAA (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 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 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 1.39% and 13.53%, respectively. At the AAA (sf) rating level, the corresponding PD is 20.42% and the LGD is 34.91%.
-- 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 A2 notes would be expected to remain the same at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A2 Notes would be expected to remain the same at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A2 Notes would be expected to remain the same at AAA (sf).

Class A2 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 AAA (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (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: 25 January 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Andrew Lynch, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Senior Vice President

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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
-- 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
-- Unified Interest Rate Model for European Securitisations
-- 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.