Press Release

DBRS Confirms Class A1 and A2 Notes of Belgian Lion NV / SA (Belgian Lion SME II)

Structured Credit
July 13, 2018

DBRS Ratings Limited (DBRS) confirmed the AAA (sf) ratings on the Class A1 and A2 notes (the Class A Notes) issued by Belgian Lion NV / SA (Belgian Lion SME II or the Issuer).

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date.

The rating action follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults as of the May 2018 payment date.
-- Probability of Default (PD), recovery rate and expected loss assumptions for the remaining collateral pool.
-- The credit enhancement (CE) available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The transaction is a cash flow securitisation collateralised by a portfolio of loans granted to self-employed, small and medium-sized enterprises (SMEs) and corporate borrowers based in Belgium. The loans were originated by ING Belgium SA/NV (ING or the Originator). The transaction was amended on 5 May 2015 (the Amendment) including, among other changes, an extension of the replenishment period, which ended in May 2017.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS’s expectations. As of April 2018, there was no cumulative defaults reported, whereas the cumulative delinquency ratio remains low at 0.6%.

As of the May 2018 payment date, the aggregate realised losses in respect of the loans were at 0.2% of the original portfolio balance as of closing and 0.03% of the balance at the restructuring date. Defaulted loans were at 2.4% and 1.30% in terms of the portfolio balance as of closing and restructuring, respectively.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default and recovery assumptions. The PD was maintained at 1.6%.

CREDIT ENHANCEMENT
The CE available to the Class A Notes continued to increase as the transaction continued to deleverage. As of the May 2018 payment date, the CE available to the Class A Notes was 42.1%.

ING is the main Account Bank provider of the transaction. DBRS’s private rating of ING complies with the Minimum Institution Rating, given the rating assigned to Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

ING is the swap counterparty to the transaction. The DBRS private rating of ING meets the swap counterparty rating requirements, given the rating assigned to the Class A Notes, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating CLOs Backed by Loans to European SMEs.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of 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 reports provided by ING and loan-level data from the European DataWarehouse GmbH.

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.

The last rating action on this transaction took place on 14 July 2017 when DBRS confirmed its rating on the Class A 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 to the parameters used to determine the rating (the “Base Case”):
-- Probability of Default Rates Used: base case PD of 1.6%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 25.2% at the AAA (sf) stress level for the Class A Notes, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at AAA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class A Notes at 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 and US regulations only.

Lead Analyst: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 14 August 2012

DBRS Ratings Limited
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United Kingdom
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
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- 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
-- Interest Rate Stresses for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit 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.

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

Ratings

Belgian Lion NV / SA (Belgian Lion SME II)
  • Date Issued:Jul 13, 2018
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:--
  • Rating Recovery:
  • Issued:UK
  • Date Issued:Jul 13, 2018
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:--
  • Rating Recovery:
  • Issued:UK
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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