DBRS Confirms Rating on Domos 2011-B

DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A notes issued by Domos 2011-B (Domos B).
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 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.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the Class A notes to cover the expected losses at the AAA (sf) rating level.

DOMOS 2011 is a French securitisation of mortgages originated and serviced by BNP Paribas Personal Finance (BNP PF). The transaction is separated into two Compartments: Domos 2011-A and Domos 2011-B. Each Compartment is backed by a separate portfolio of French residential housing loans and has separate waterfalls. The loans in Domos B were originated through retail branches or brokers with a term to maturity of less than 20 years (as of the closing date). The transaction originally closed in October 2011 and went through a restructuring in July 2015. The restructuring reduced the reserve fund and increased the note size.

In March 2018, DBRS discontinued its ratings on the Class A1 and Class A2 notes issued by Domos 2011-A following the repayment in full of the rated notes on 26 February 2018

PORTFOLIO PERFORMANCE
As of the end of February 2018, loans more than 90 days delinquent represented 0.3% of the outstanding portfolio balance and the cumulative default rate represented 1.3% of the sum of the original portfolio balance at closing and the additional portfolio purchased at the transaction restructuring. Both arrears and defaults remained low and within DBRS’s expectations.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 6.4% and 21.5%, respectively.

CREDIT ENHANCEMENT
As of the March 2018 payment date, the CE available to the Class A notes has increased to 43.9%. The sources of CE are the subordination of the Class B notes as well as partial credit support provided by the General Reserve.

The transaction benefits from a non-amortising General Reserve, currently at its target amount of EUR 77.0 million, that is available to cover shortfalls in senior fees and interest on the Class A notes. Additionally, the portion of the General Reserve equal to the difference between the required balance and the minimum balance provides credit support and will form part of the principal available funds upon the occurrence of an Accelerated Redemption Event. The minimum balance of the reserve is defined as 1.0% of the total outstanding balance of the Class A and Class B notes, currently equal to EUR 8.6 million.

BNP Paribas Securities Services S.C.A. (BNP SS) is the main account bank provider in this transaction. Based on DBRS’s private rating of BNP SS and the mitigants outlined in the transaction documents, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

BNP PF is the swap counterparty in this transaction. The DBRS private rating of BNP PF is above the First Rating Threshold as described in DBRS’s “Derivative 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 rating 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’s 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 this rating include investor reports provided by the Management Company France Titrisation and loan-by-loan 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 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 24 July 2017, when DBRS confirmed its AAA (sf) rating on the Class A notes.

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.
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 remaining collateral 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 assumptions for the remaining collateral pool are 6.4% and 21.5%, respectively. At the AAA (sf) rating level, the corresponding PD is 28.6% and the LGD is 48.3%.

-- 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 on the Class A notes would be expected to remain 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 remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A notes would be expected to remain at AAA (sf).

Class A notes 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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 20 January 2012

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The rating methodologies used in the analysis of these 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
-- Derivative Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

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.