Press Release

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

Structured Credit
December 11, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) 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).

DBRS Morningstar’s ratings of the Class A Notes address the timely payment of interest and the 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:
-- The portfolio performance, in terms of level of delinquencies and defaults, as of the November 2020 payment date.
-- The one-year base case probability of default (PD) and default and recovery rates considering the worst-case portfolio composition allowed under the eligibility criteria.
-- The fact that no replenishment termination event has occurred to date.
-- The current available credit enhancement to the Class A Notes to cover the expected losses assumed in line with the AAA (sf) rating level.
-- The current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

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 includes 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 the cumulative default rate or cumulative realised losses rate exceeding 3.0% and 0.5% of the initial portfolio balance, respectively.

As of November 2020, loans that were one to three months in arrears represented 0.4% of the outstanding portfolio balance. The 90+ delinquency ratio was 0.1% and the cumulative default ratio was 1.5%.

As of 30 October 2020, around 15.5% of the outstanding balance is currently under COVID-19 payment postponements. DBRS Morningstar continues to monitor the performance of the portfolio, including loans that could come to the end of the grace period in the short term.


DBRS Morningstar maintained its annualised weighted-average base case PD assumption at 1.9%. 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 2020, 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.

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 payment holidays and delinquencies may continue to increase in the coming months for many SME transactions, some meaningfully. The ratings are based on additional analysis and, where appropriate, adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.

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 2 December 2020. For details, see the following commentaries: and The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 18 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated Structured Credit transactions in Europe. For more details please see, and

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating CLOs Backed by Loans to European SMEs” (30 September 2020).

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

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 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 Morningstar 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 ratings, 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 12 December 2019, when DBRS Morningstar confirmed its ratings of the Class A Notes at AAA (sf).

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the ratings (the base case):
-- PD Rates Used: Base case PD of 1.9%, a 10% and 20% increase in the base case PD.
-- Recovery Rates Used: Base case recovery rates of 23.5% at the AAA (sf) stress level, 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 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 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 U.S. regulations only.

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 12 December 2018

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:

-- Rating CLOs Backed by Loans to European SMEs (30 September 2020) and DBRS Morningstar SME Diversity Model,
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020),
-- Cash Flow Assumptions for Corporate Credit Securitizations (21 July 2020),
--Rating CLOs and CDOs of Large Corporate Credit (21 July 2020),
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
-- Master European Structured Finance Surveillance Methodology (22 April 2020),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (21 September 2020),
-- Operational Risk Assessment for European Structured Finance Servicers (19 November 2020),
-- Operational Risk Assessment for European Structured Finance Originators (30 September 2020),

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