DBRS Confirms and Upgrades Delft 2017 B.V.

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by Delft 2017 B.V. (the Issuer):

-- Class A confirmed at AAA (sf)
-- Class B upgraded to AA (high) (sf) from AA (sf)
-- Class C upgraded to A (high) (sf) from A (sf)
-- Class D upgraded to BBB (high) (sf) from BBB (sf)
-- Class E upgraded to BB (sf) from BB (low) (sf)

The rating on the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The transaction structure includes a net weighted-average coupon cap (Net WAC Cap) for the Class B, Class C, Class D and Class E notes, for which the ratings address the ability to pay principal and interest on or before the legal final maturity date.

For the avoidance of doubt, DBRS’s ratings do not address payments of the Net WAC Cap additional amounts, which are the amounts accrued and become payable junior in the revenue and principal waterfalls if the coupon due on a series of notes exceeds the applicable Net WAC Cap.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

Delft 2017 B.V. closed on 23 January 2017 and is a securitisation backed by a static collateral portfolio previously backing EMF-NL 2008-1 B.V., which was called on 17 January 2017. The portfolio comprises non-conforming mortgage loans originated by ELQ Portefeuille I B.V., which was a subsidiary of Lehman Brothers Inc. and no longer originates loans. The Servicer of the portfolio is Adaxio B.V. The non-conforming characteristics of the pool include self-certified income, borrowers with negative credit history as well as borrowers classified as unemployed, self-employed, or pensioners.

PORTFOLIO PERFORMANCE
As of April 2018, loans in two- to three-month arrears represented 1.5% of the outstanding portfolio balance, down from 1.9% in April 2017. The 90+ delinquency ratio was 5.7%, down from 6.2% in April 2017, and the cumulative loss ratio was 0.6%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the latest data of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 19.8% and 35.9%, respectively, in this review.

CREDIT ENHANCEMENT AND RESERVES
Credit enhancement to each class of rated notes is provided by their subordinated notes and the Non-Liquidity Reserve Fund. As of the April 2018 payment date, credit enhancement to the Class A notes was 40.5%, up from 37.2% at the DBRS initial rating. Credit enhancement to the Class B notes was 27.3%, up from 25.0% at the DBRS initial rating. Credit enhancement to the Class C notes was 22.1%, up from 20.3% at the DBRS initial rating. Credit enhancement to the Class D notes was 17.0%, up from 15.5% at the DBRS initial rating. Credit enhancement to the Class E notes was 10.7%, up from 9.7% at the DBRS initial rating.

The transaction benefits from a Reserve Fund, sized at 2% of the aggregate initial balance of the Class A to Z notes at the Closing Date. The Reserve Fund is divided into a Non-Liquidity Reserve Fund and a Liquidity Reserve Fund. The Liquidity Reserve Fund is currently at its EUR 1.7 million target amount, which is equal to 2% of the Class A notes outstanding balance, subject to a floor of 1% of the initial Class A notes balance when the Class A notes are outstanding. The Liquidity Reserve Fund can be used to pay any unpaid senior fees and interest due and payable on the Class A notes, after the application of available revenue and the Non-Liquidity Reserve Fund. The Non-Liquidity Reserve Fund is currently at its EUR 1.4 million target amount, which is the difference between the target amounts for the Reserve Fund and the Liquidity Reserve Fund.

ABN AMRO Bank N.V. acts as the Account Bank for the transaction. The Account Bank reference rating of AA (low) - being one notch below the DBRS public Long-Term Critical Obligations Rating of ABN AMRO Bank N.V. of AA, is consistent with 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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 legal 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 “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 investor reports and loan-level data provided by the Servicer.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of the initial rating, DBRS was 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 these ratings to be of satisfactory quality.

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

The last rating action on this transaction took place on 19 May 2017, when DBRS confirmed its ratings of the Class A, Class B, Class C, Class D and Class E notes.

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 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 loans for the Issuer are 19.8% and 35.9%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 50.0% and 50.4%, respectively. At the AA (high) (sf) rating level, the corresponding PD and LGD are 47.6% and 48.8%, respectively. At the A (high) (sf) rating level, the corresponding PD and LGD are 41.7% and 45.2%, respectively. At the BBB (high) (sf) rating level, the corresponding PD and LGD are 35.3% and 42.1%, respectively. At the BB (sf) rating level, the corresponding PD and LGD are 26.3% and 37.7%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating on the Class A notes would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A notes would be expected to be at AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Class A notes would be expected to be at A (low) (sf).

Class A 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 AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

Class B risk sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

Class C risk sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)

Class D risk sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BB (high) (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (sf)

Class E risk sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in LGD, expected rating of B (sf)
-- 25% increase in PD, expected rating of B (high) (sf)
-- 50% increase in PD, expected rating of B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (sf)

For further information on DBRS historic 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: Kevin Ma, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 11 January 2017

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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- European RMBS Insight Methodology
-- European RMBS Insight: Dutch Addendum

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.