DBRS Assigns Final Rating to DOMOS 2017

DBRS Ratings Limited (DBRS) has today assigned a final rating of AAA (sf) to the Class A notes to be issued by DOMOS 2017 (the Issuer). The Issuer is established as a Fonds Commun de Titrisation, governed by French regulations. The Issuer used the proceeds of the Class A notes, Class B notes and Residual Units to purchase a portfolio of home loans from the Seller. The transaction will initially be revolving for 18 months and will therefore start to amortize from August 2018. The envisaged Final Legal Maturity Date of the transaction is March 2058, but will be subject to redemption events and asset reassignments.

Home loans in the portfolio are guaranteed by either a mortgage over the relevant property or an institutional gurantee such as a Crédit Logement guarantee.

The Seller of the home loans is BNP Paribas Personal Finance (BNPP PF). The Seller will continue to be the Servicer of the portfolio following the sale.

The Class A notes benefit from 22.88% credit enhancement, which consists of 17.88% subordination from the Class B notes and a fully funded general reserve sized at 5%. Additionally, the Class A notes benefit from liquidity support provided by the use of principal receipts from the home loans. Any use of principal receipts will be recorded as a Principal Difficiency Amount.

Under Revolving and Normal Redemption the Class A notes will receive a floating rate coupon of six-month EURIBOR + 0.18% and the Class B notes receive six-month EURIBOR + 1.30%. The coupons will be floored at 0% with payment dates occuring semi annually in Februrary and August.

As of 31 January 2017, the portfolio consists of 12,349 loans. The total balance of the portfolio amounts to approximately EUR 1.3 billion. The average loan balance per borrower is EUR 104,531. The weighted-average (WA) seasoning of the portfolio is 6.48 years with a WA maturity of 13.85 years. The WA loan-to-value of the portfolio is 68.86% with 7.67% in negative equity. There are 48.5% buy-to-let or second home loans in the portfolio and 19.74% of the portfolio consit of loans granted to international buyers.

36.18% of the loans are fixed-for-life loans and 26.39% are floating rate loans with caps with the remainer floating without caps. The transaction is structured to be fully hedged benefiting from both fixed rate and variable rate swaps.

BNP Paribas S.A. (BNPP) is the the Specially Dedicated Account Bank for the transaction. BNPP’s Critical Obligation Rating is currently AA(high), which complies with the threshold for the Account Bank, given the rating assigned to the Class A notes. Additionally, the transaction documents include downgrade trigger language should BNPP be downgraded below the threshold.

The DBRS rating addresses timely interest on the Class A notes and ultimately payment of principal by the Legal Final Maturity Date in March 2058. DBRS based the ratings primarily on:
-- The transaction capital structure, form and sufficiency of available credit enhancement and liquidity provisions.
-- The portfolio characteristics demonstrated by the pool data. The portfolio was used with the European RMBS Credit Model to estimate the expected probability of default (PD), loss given default (LGD) and expected loss based on different guarantee providers.
-- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as downgrade and replacement language in the transaction documents, Commingling Reerve and the liquidity support available.
-- The transaction’s ability to withstand stressed cash flow assumptions and repay investors in accordance with the Terms and Conditions of the notes.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction was modeled in Intex and the default rates at which the rated notes did not return all specified cash flows in a timely manner.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda.

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

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 data and information used for this rating include BNPP. their representatives and Delloitte LLP.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

DBRS was supplied with one or more third-party assessments. DBRS applied additional cash flow stresses in its rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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 to the parameters used to determine the rating (the Base Case): in respect of the Class A notes, the PD and LGD at the AAA (sf) stress scenario of 44.35% and 48.92%, respectively, were stressed assuming a 25% and 50% increase on both the PD and LGD.

DBRS concludes the following impact on the Class A notes:
-- 25% increase of the PD, ceteris paribus would lead to a downgrade of the rating to AA (high) (sf).
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to AA (sf).
-- 25% increase of the LGD, ceteris paribus would lead to a downgrade of the rating to AA (high) (sf).
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade to AA (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to A (high) (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to A (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to BBB (high) (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.

Lead Analyst: Rehanna Sameja, Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 8 March 2017

DBRS Ratings Limited
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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

-- Derivative Criteria for European Structured Finance Transactions (October 2016);
-- Legal Criteria for European Structured Finance Transactions (September 2016);
-- Operational Risk Assessment for European Structured Finance Servicers (October 2016);
-- Operational Risk Assessment for European Structured Finance Originators (October 2016);
-- Unified Interest Rate Model for European Securitisations (November 2016).
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (November 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