Press Release

DBRS Morningstar Confirms Ratings on Belgian Lion NV/SA. Compartment Belgian Lion SME III and Removes UR-Neg. Status

Structured Credit
July 06, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) ratings on 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 also removed the ratings from Under Review with Negative Implications (UR-Neg.), where they were placed on 14 April 2021. For more information, please see this press release:

DBRS Morningstar’s ratings on 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 May 2021 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; and
-- The release of DBRS Morningstar’s SME Diversity Model v2.5.0.0.

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 closed in December 2018 and includes a revolving period of almost three years (with the last replenishment date 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 met 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 May 2021, loans that were one to three months in arrears represented 0.4% of the outstanding portfolio balance. The 90+-day delinquency ratio was 0.1% and the aggregate current balance of defaulted loans stood at 1.6%.

DBRS Morningstar maintained its annualised weighted-average base case PD assumption at 1.9% as a result of a worst-case portfolio composition analysis based on the eligibility criteria.

Following the release of its SME Diversity Model v2.5.0.0, DBRS Morningstar updated its lifetime default and recovery assumptions to 36.6% and 23.5%, respectively, at the AAA (sf) rating level.

As of May 2021, 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 unrated Class B Notes provides the credit enhancement.

ING Belgium acts as the account bank for this transaction. Based on DBRS Morningstar’s private rating on 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 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 adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar conducted an additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand high levels of payment holidays in the portfolio. As of 30 April 2021, around 2.8% of the outstanding balance is currently under coronavirus-related payment postponements.

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 18 June 2021. 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:

For more information regarding the structured finance rating approach 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings 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” (28 June 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at:

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

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 14 April 2021, when DBRS Morningstar placed the ratings on the Class A Notes UR-Neg. following an asset model error.

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 with the parameters used to determine the ratings (the Base Case):

-- PD Rates Used: Base case PD of 1.9%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rate of 23.5% at the AAA (sf) rating 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: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Helvia Meana, Senior Analyst
Rating Committee Chair: Alfonso Candelas, 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 (28 June 2021) and DBRS Morningstar SME Diversity Model v2.5.0.0,
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020),
-- Cash Flow Assumptions for Corporate Credit Securitizations (8 February 2021),
-- Rating CLOs and CDOs of Large Corporate Credit (8 February 2021),
-- Legal Criteria for European Structured Finance Transactions (6 April 2021),
-- Master European Structured Finance Surveillance Methodology (8 February 2021),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (14 January 2021),
-- Operational Risk Assessment for European Structured Finance Servicers (19 November 2020),
-- Operational Risk Assessment for European Structured Finance Originators (30 September 2020),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021),

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 [email protected].