DBRS Morningstar Confirms Ratings of BEST 2010 B.V. Following Amendment

DBRS Ratings GmbH (DBRS Morningstar) confirmed the ratings on the bonds issued by BEST 2010 B.V. (the Issuer), as follows:

-- Senior Class A Mortgage-Backed Floating-Rate Notes at AAA (sf)
-- Mezzanine Class B Mortgage-Backed Floating-Rate Notes at AA (sf)
-- Junior Class C Mortgage-Backed Floating-Rate Notes at BBB (low) (sf)

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in October 2099.

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

-- Portfolio performance, in terms of delinquencies, defaults, and losses as of the July 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 notes to cover the expected losses at their respective rating levels.
-- No early amortisation events occurred so far.
-- An amendment to the transaction extending the revolving period by one year until October 2021 (the Amendment).
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The Issuer is a securitisation of Dutch residential mortgages originated by local cooperative credit institution members of Coöperatieve Rabobank U.A. (with a DBRS Morningstar Long-Term Critical Obligations Rating (COR) of AAA) and Rabohypotheekbank N.V and established in November 2010. Servicing of the mortgages is conducted by the relevant local cooperative or Service Centrum Financieren (a centralised service centre, which is part of the Group). The securitisation included a revolving period initially scheduled to end on the October 2020 payment date, which following the execution of the Amendment on 11 September 2020 has been extended to October 2021. During the revolving period, the Issuer is allowed to replenish the repaid receivables subject to the mortgage loan criteria and substitution criteria.

The substitution criteria, which allow the continuation of replenishment of receivables during the revolving period, stipulates that the 60 days’ arrears ratio is less than 2.25% (currently at 0.06%), the realised loss ratio is less than 0.60% of the original portfolio balance (currently at 0.1%), the principal deficiency ledger is equal to zero, and that there have been no drawings on the reserve account. All criteria are currently met.

PORTFOLIO PERFORMANCE
Arrears and defaults have remained low and stable over the life of the transaction. As of July 2020, loans two to three months in arrears represented 0.01% of the outstanding portfolio balance, the 90+ delinquency ratio was 0.05%, and the cumulative default ratio stood at 0.9%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the pool of receivables and considered a base case PD and LGD assumptions of 2.9% and 14.1%, respectively.

CREDIT ENHANCEMENT
As of the July 2020 payment date, credit enhancement to the Senior Class A Mortgage-Backed Floating-Rate Notes was 7.3%, up from 7.0% at the DBRS Morningstar initial rating. Credit enhancement to the Mezzanine Class B Mortgage-Backed Floating-Rate Notes was 4.3%, up from 4.0% at the DBRS Morningstar initial rating. Credit enhancement to the Junior Class C Mortgage-Backed Floating-Rate Notes was 1.3%, up from 1.0% at the DBRS Morningstar initial rating. Because of the revolving period, credit enhancements to the notes remain unchanged since the latest DBRS Morningstar rating action.

The transaction benefits from a reserve fund of EUR 650 million and a liquidity reserve fund of EUR 1,010 million, which can be drawn upon to cover interest shortfalls should the reserve account be insufficient.

Coöperatieve Rabobank U.A. acts as the account bank for the transaction. Based on the account bank’s reference rating of AA (high), which is one notch below its DBRS Morningstar Long-Term 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 Senior Class A Mortgage-Backed Floating-Rate Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Coöperatieve Rabobank U.A. also acts as the swap counterparty for the transaction and its AAA COR is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex.

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 ratings are 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, incorporated a moderate reduction in residential property values, and conducted additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand potential high levels of payment holidays in the portfolio.

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 last updated on 10 September July 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/366542/global-macroeconomic-scenarios-september-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar’s 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
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 ratings 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.

An asset and a cash flow analysis were both conducted. Due to 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.

DBRS Morningstar conducted a review of the amended transaction documents including the amendment agreement. A review of any other transaction’s legal documents was not conducted as the these 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 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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings includes the legal amendment documentation provided by Coöperatieve Rabobank U.A., investor reports provided by Intertrust Administrative Services B.V., 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 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.

The last rating action on this transaction took place on 15 May 2020, when DBRS Morningstar confirmed the ratings of the Class A, B, and C Notes at AAA (sf), AA (sf), and BBB (low) (sf), respectively.

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 2.9% and 14.1%, 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 Senior Class A Mortgage-Backed Floating-Rate Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Senior Class A Mortgage-Backed Floating-Rate Notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Senior Class A Mortgage-Backed Floating-Rate Notes would be expected to fall to AA (low) (sf).

Senior Class A Mortgage-Backed Floating-Rate Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)

Mezzanine Class B Mortgage-Backed Floating-Rate Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Junior Class C Mortgage-Backed Floating-Rate Notes 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 BBB (low) (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 BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 18 November 2010

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/354616/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

-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020),
https://www.dbrsmorningstar.com/research/357430/operational-risk-assessment-for-european-structured-finance-originators

-- European RMBS Insight Methodology (2 April 2020) and European RMBS Insight Model v 4.2.3.0,
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

-- Derivative Criteria for European Structured Finance Transactions (26 September 2019),
https://www.dbrsmorningstar.com/research/350907/derivative-criteria-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].