DBRS Morningstar Confirms Rating on Sinopel 2019 B.V.

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) rating on the Class A notes issued by Sinopel 2019 B.V. (the Issuer).

The rating addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in July 2061.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses as of the April 2020 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the Class A notes to cover the expected losses at their AAA (sf) rating level;
-- Current economic environment and sustainable performance assessment, as a result of the Coronavirus Disease (COVID-19) pandemic.

The Issuer is securitisation of prime residential mortgages originated by Triodos Bank N.V. (Triodos) secured over properties in the Netherlands. Triodos is a bank with an underlying mission to lend in a way that adds environmental or social value. Triodos acts as the master servicer, but delegates primary servicing to Stater Nederland B.V. Hypocasso B.V., which was appointed as subservicer on 1 May 2020 and is also responsible for special servicing.

PORTFOLIO PERFORMANCE
As of April 2020 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 0.1%, 0.9%, and 0.1% of the outstanding principal balance, respectively, while there were no reported loans more than 90 days delinquent. There have not been any foreclosed mortgage loans to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 1.9% and 9.8%, respectively.

CREDIT ENHANCEMENT
The subordination of the Class B notes provides credit enhancement to the Class A notes. As of the April 2020 payment date, credit enhancement to the Class A notes increased to 5.4% from 5.0% at the time of the DBRS Morningstar initial rating 12 months ago.

The transaction benefits from liquidity support provided by a cash advance facility extended by Coöperatieve Rabobank U.A., with a maximum drawable amount equal to 1.0% of the outstanding Class A notes balance, subject to a floor of EUR 4.8 million. It is available to cover senior fees and interest on the Class A notes.

Coöperatieve Rabobank U.A. acts as the account bank for the transaction. Based on Coöperatieve Rabobank U.A. reference rating of AA (high), which is one notch below DBRS Morningstar’s Long-Term Critical Obligations Rating (COR) of AAA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes in the transaction, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may arise in the coming months for many RMBS transactions, some meaningfully. The rating is based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction DBRS Morningstar increased the expected default rate for self-employed borrowers and assumed a moderate decline in residential property prices.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were updated on 1 June 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/361868/dbrs-morningstar-global-macroeconomic-scenarios-june-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 5 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated RMBS transactions in Europe. For more details please see https://www.dbrsmorningstar.com/research/360599/european-rmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
DBRS Morningstar considered that the presence of 19.3% loans backed by the NHG guarantee was a social factor (Social Impact of Product & Services) as outlined within the DBRS Morningstar framework – “DBRS Morningstar’s Approach to Environmental, Social and Governance Risk Factors in Credit Ratings”. DBRS Morningstar assumed reduced loss severities for loans backed by an NHG guarantee as outlined in its methodology (https://www.dbrsmorningstar.com/research/357926/european-rmbs-insight-dutch-addendum). This is credit positive and impacts the rating.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology” (22 April 2020).

DBRS Morningstar 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. DBRS Morningstar reviewed the appointment of the Hypocasso B.V. as the subservicer.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: http://www.dbrsmorningstar.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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for this rating include investor and servicer reports provided by Intertrust Administrative Services B.V. (the Issuer Administrator) and loan-level data provided by 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 purpose of providing this rating 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 since the Initial Rating Date.
The lead analyst responsibilities for this transaction have been transferred to Petter Wettestad.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies is available at www.dbrsmorningstar.com.

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

-- DBRS Morningstar 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 1.9% and 9.8%, respectively. At the AAA (sf) rating level, the PD and LGD assumed are 17.4% and 26.1%, respectively.
-- 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 of the Class A notes would be expected to fall to AA (low) (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to AA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to fall to A (high) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (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 (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:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

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

Lead Analyst: Petter Wettestad, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 19 July 2019

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main - Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (22 April 2020),
https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology.
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020), https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers.
-- European RMBS Insight Methodology (2 April 2020) and European RMBS Insight Model v4.2.2.0,
https://www.dbrsmorningstar.com/research/359192/european-rmbs-insight-methodology.
-- European RMBS Insight: Dutch Addendum (13 March 2020), https://www.dbrsmorningstar.com/research/357926/european-rmbs-insight-dutch-addendum.
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019), https://www.dbrsmorningstar.com/research/351557/interest-rate-stresses-for-european-structured-finance-transactions.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].