DBRS Confirms Class A Notes of Wendelstein 2017-1 UG (haftungsbeschränkt)

DBRS Ratings Limited (DBRS) confirmed its A (sf) rating on the Class A Notes issued by Wendelstein 2017-1 UG (haftungsbeschränkt) (Wendelstein 2017-1).

The confirmation follows the issuance of additional Class A Notes (together with the Initial Class A Notes, the Class A Notes) subordinated by additional Class B Notes (together with the Initial Class B Notes, the Class B Notes, and together with the additional Class A Notes, the Additional Notes). The credit enhancement will remain at 8%. The Class B Notes are not rated.

The rating action is based on the following analytical considerations:
-- Portfolio performance in terms of delinquencies.
-- Probability of default (PD) rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- The credit enhancement (CE) available to the rated Notes to cover the expected losses at the A (sf) rating level.

Wendelstein 2017-1, closed in November 2017, is a securitisation of a portfolio of German residential mortgage loans originated and serviced by Deutsche Bank AG (DB AG), Deutsche Bank Bauspar-Aktiengesellschaft (DB Bauspar) and Deutsche Bank Privat und Geschäftskunden Aktiengesellschaft (DB Private), the latter two being subsidiaries of DB AG (rated A (high)/R-1 by DBRS). The transaction is currently in the Replenishment Period, which will end on 31 December 2020 or when the Replenishment Termination Event occurs.

In November 2017, Wendelstein 2017-1 issued two classes of mortgage-backed notes, Initial Class A Notes subordinated by Initial Class B Notes (together the Initial Notes). The Initial Class A Notes have an 8% credit support from the subordinated Initial Class B Notes.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The portfolio’s performance is stable since the initial rating assignment. As of 31 March 2018, loans more than 90 days delinquent remained low at 0.01% of the outstanding collateral pool balance; loans more than 30 days delinquent represented 0.05% of the outstanding collateral pool balance. DB Private continues to repurchase loans out of the portfolio. As the transaction is still revolving and the performance is within DBRS’s expectation, DBRS maintained its PD and LGD assumptions at 14.1% and 42.4%, respectively, at the A (sf) rating level.

CREDIT ENHANCEMENT
The CE available to the Class A Notes remains unchanged at 8.0% as the transaction is revolving. The CE is provided through the subordinated Class B Notes.

DB Private is the counterparty on all major roles in the transaction including Seller, Master Servicer, Account Bank, Liquidity Facility Provider and Cash Administrator. DB Private’s reference rating meets the Minimum Institution Rating criteria, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, given the rating assigned to the Class A Notes.

Notes:
All figures are in euros unless otherwise noted.

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

In DBRS’s opinion, the change(s) under consideration do not require the application of the entire principal methodology. Therefore, DBRS focused on the asset analysis. A review of the transaction legal documents was limited to the documentation pertaining to the issuance of the Further Notes. All the other documents have remained unchanged since the most recent rating action.

An asset analysis was conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include loan-by-loan data on the CP, CP stratification tables and default performance data provided by Deutsche Bank AG.

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

At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the 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 is the first rating action since the Initial Rating Date.

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 Series A notes, the PD of 14.1% and LGD of 42.4%, corresponding to an A (sf) stress scenario, were stressed assuming 25% and 50% increase on the PD and LGD:
-- A hypothetical increase of the PD of 25%, ceteris paribus, would lead to a downgrade to A (low) (sf).
-- A hypothetical increase of the PD of 50%, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- A hypothetical increase of the LGD of 25%, ceteris paribus, would lead to a downgrade to A (low) (sf).
-- A hypothetical increase of the LGD of 50%, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- A hypothetical increase of the PD of 25% and LGD by 25%, ceteris paribus, would lead to a downgrade to BBB (sf).
-- A hypothetical increase of the PD of 25% and LGD by 50%, ceteris paribus, would lead to a downgrade to BBB (low) (sf).
-- A hypothetical increase of the PD of 50% and LGD by 25%, ceteris paribus, would lead to a downgrade to BBB (low) (sf).
-- A hypothetical increase of the PD of 50% and LGD by 50%, ceteris paribus, would lead to a downgrade to BB (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 and US regulations only.

Lead Analyst: Roger Bickert, Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 20 November 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.

-- Master European Structured Finance Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.