Press Release

DBRS Morningstar Confirms Ratings of Belgian Lion NV/SA. Compartment Belgian Lion SME III

Structured Credit
December 12, 2019

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings of the Class A1 and Class A2 Notes (together, the Class A Notes) issued by Belgian Lion NV/SA. Compartment Belgian Lion SME III (the Issuer) at AAA (sf).

DBRS Morningstar’s ratings of the Class A Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in December 2046.

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

-- Portfolio performance, in terms of delinquencies, defaults, and losses.
-- The probability of default (PD), recovery rate and expected loss assumptions considering the worst-case portfolio composition allowed under the eligibility criteria.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.
-- No replenishment termination event occurred to date.

The transaction is a cash flow securitisation collateralised by a portfolio of loans granted by ING Belgium NV/SA (ING Belgium) to self-employed individuals, small and medium-size enterprises (SMEs) and corporate borrowers based in Belgium.

The transaction included a revolving period of almost three years (the last replenishment date being in November 2021) during which ING Belgium has the option to sell new loans at par to the Issuer as long as the eligibility criteria is complied with on a monthly basis. The revolving period will end prematurely after the occurrence of certain events, including a cumulative default rate or cumulative realised losses rate exceeding 3.0% and 0.5% of the initial portfolio balance, respectively.

As of November 2019, loans that were one to three months in arrears represented 0.7% of the outstanding portfolio balance. The 90+ delinquency ratio was 0.0% and the cumulative default ratio was 0.5%.

DBRS Morningstar maintained its annualised weighted-average base case PD assumption at 1.91%. DBRS Morningstar also maintained its worst-case portfolio composition analysis based on the eligibility criteria, resulting in a default rate and recovery rate of 35.2% and 23.5%, respectively, at the AAA (sf) rating level.

As of November 2019, the credit enhancement to the Class A Notes was 26.5%, stable since closing in November 2018 because of the revolving period. Subordination of the non-rated Class B Notes provides the credit enhancement.

ING Belgium acts as the account bank for this transaction. Based on DBRS Morningstar’s private rating of ING Belgium, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in its proprietary Excel-based cash flow engine.

All figures are in euros unless otherwise noted.

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

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

An asset and a cash flow analysis were both conducted. Because of 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.

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 at:

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 “Global Methodology for Rating Sovereign Governments” at:

The sources of data and information used for these ratings include investor and servicer reports provided by ING Belgium and loan-level data from the European DataWarehouse GmbH.

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

At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

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

This is the first rating action on this transaction since the initial rating date on 12 December 2018 when DBRS Morningstar assigned AAA (sf) ratings to the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies, is available on

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- PD Rates Used: Base case PD of 1.9%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rate of 23.5% at the AAA (sf) stress level, a 10% and 20% decrease in the base case recovery rate. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS Morningstar 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 downgrade of the Class A Notes to AA (high) (sf). A scenario combining both an increase in the PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a downgrade of the Class A Notes to AA (high) (sf).

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 12 December 2018

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main – Deutschland

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at:

-- Rating CLOs Backed by Loans to European SMEs
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at