DBRS Morningstar Upgrades and Confirms Ratings on Three Dutch Property Finance B.V. Transactions

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Dutch Property Finance 2017-1 B.V., Dutch Property Finance 2018-1 B.V., and Dutch Property Finance 2019-1 B.V. (collectively, the Issuers):

Dutch Property Finance 2017-1 (DPF 2017-1):
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes confirmed at A (high) (sf)
-- Class D Notes upgraded to A (sf) from BBB (high) (sf)
-- Class E Notes upgraded to BBB (sf) from BBB (low) (sf)

Dutch Property Finance 2018-1 (DPF 2018-1):
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AA (high) (sf) from AA (sf)
-- Class C Notes upgraded to A (high) (sf) from A (sf)
-- Class D Notes upgraded to A (sf) from BBB (high) (sf)
-- Class E Notes upgraded to BBB (high) (sf) from BBB (low) (sf)

Dutch Property Finance 2019-1 (DPF 2019-1):
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes confirmed at A (high) (sf)
-- Class D Notes upgraded to A (high) (sf) from BBB (high) (sf)
-- Class E Notes upgraded to BBB (high) (sf) from BBB (low) (sf)

For each transaction, the rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity dates in January 2048, April 2051, and October 2052 for DPF 2017-1, DPF 2018-1, and DPF 2019-1, respectively. The rating on the Class B Notes addresses the ultimate payment of interest and principal, and timely payment of interest while the senior-most class outstanding. The ratings on the Class C, Class D, and Class E Notes address the ultimate payment of interest and principal on or before the legal final maturity dates.

The upgrades and confirmations follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the January 2022 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.

The Issuers are bankruptcy-remote special-purpose vehicles incorporated in the Netherlands. The issued notes were used to fund the purchase of Dutch mortgage receivables secured against buy-to-let residential and commercial properties. The mortgage loans were originated or acquired by RNHB B.V.

PORTFOLIO PERFORMANCE
DPF 2017-1:
As of the January 2022 payment date, loans two to three months in arrears represented 0.1% of the outstanding portfolio balance, down from 0.3% in January 2021. Loans more than three months in arrears represented 1.0% of the outstanding portfolio balance, up from 0.8% in January 2021. The cumulative loss ratio was 0.2%.

DPF 2018-1:
As of the January 2022 payment date, loans two to three months arrears represented 0.1% of the outstanding portfolio balance, stable since January 2021. Loans more than three months in arrears represented 0.9% of the outstanding portfolio balance, down from 1.0% in January 2021. The cumulative loss ratio was 0.0%.

DPF 2019-1:
As of the January 2022 payment date, loans two to three months arrears represented 0.1% of the outstanding portfolio balance, down from 0.5% in January 2021. Loans more than three months in arrears represented 0.2% of the outstanding portfolio balance, down from 0.8% in January 2021. The cumulative loss ratio was 0.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables in each transaction and updated its base case PD and LGD assumptions as follows:

DPF 2017-1: Base case PD of 11.1%; base case LGD of 11.8%
DPF 2018-1: Base case PD of 8.7%; base case LGD of 10.2%
DPF 2019-1: Base case PD of 9.4%; base case LGD of 11.0%

CREDIT ENHANCEMENT
DPF 2017-1:
As of the January 2022 payment date, credit enhancement to the Class A, Class B, Class C, Class D, and Class E Notes was 47.7%, 27.9%, 20.5%, 12.9%, and 9.3%, respectively, up from 25.7%, 15.0%, 11.1%, 7.0%, and 5.0% at the DBRS Morningstar initial rating, respectively. Credit enhancement is provided by subordination of junior classes and a reserve fund of EUR 17 million, available to cover senior fees, interest, and principal (via the principal deficiency ledgers) on the rated notes.

DPF 2018-1:
As of the January 2022 payment date, credit enhancement to the Class A, Class B, Class C, Class D, and Class E Notes was 37.9%, 21.9%, 15.4%, 9.6%, and 8.2%, respectively, up from 23.1%, 13.3%, 9.4%, 5.9%, and 5.0% at the DBRS Morningstar initial rating, respectively. Credit enhancement is provided by subordination of junior classes and a reserve fund of EUR 8.0 million, available to cover senior fees, interest, and principal (via the principal deficiency ledgers) on the rated notes.

DPF 2019-1:
As of the January 2022 payment date, credit enhancement to the Class A, Class B, Class C, Class D, and Class E Notes was 50.0%, 29.2%, 21.5%, 13.6%, and 9.8%, respectively, up from 25.7%, 15.0%, 11.1%, 7.0%, and 5.0% at the DBRS Morningstar initial rating, respectively. Credit enhancement is provided by subordination of junior classes and a reserve fund of EUR 8.0 million, available to cover senior fees, interest, and principal (via the principal deficiency ledgers) on the rated notes.

Elavon Financial Services DAC acts as the account bank for each transaction. Based on the DBRS Morningstar private rating of Elavon Financial Services DAC, 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 each transaction, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

NatWest Markets Plc acts as the swap counterparty for each transaction. DBRS Morningstar's public Long-Term Critical Obligations Rating of NatWest Markets Plc at A (high) is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

The rating of the Class C Notes at A (high) (sf) in each transaction materially deviates from the higher rating implied by the quantitative model. DBRS Morningstar considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by a quantitative model that is a substantial component of a rating methodology; in this case, the rating addresses the ultimate payment of interest and principal on or before the final maturity date as defined in the transaction legal documents. DBRS Morningstar typically expects bonds rated in the AA category in the respective rating scenario to be able to pay interest on a timely basis once they are the most senior bond in the transaction.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ESG CONSIDERATIONS
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: https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (8 February 2022).

Other methodologies referenced in these transactions are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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

A review of the transactions’ legal documents was conducted in the context of amendments to each transaction in July 2021 which involved the implementation of a cash trap mechanism for certain loan products.

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/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include investor reports provided by Elavon Financial Services DAC, UK Branch, and loan-level data provided by RNHB B.V. and 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 DPF 2017-1 took place on 14 May 2021 when DBRS Morningstar confirmed its ratings of the Class A, Class C, Class D, Class E Notes at AAA (sf), A (high) (sf), BBB (high) (sf), and BBB (low) (sf), respectively, and upgraded its rating of the Class B Notes to AA (high) (sf) from AA (sf).

The last rating action on DPF 2018-1 took place on 14 May 2021 when DBRS Morningstar confirmed its ratings of the Class A, Class B, Class C, and Class E Notes at AAA (sf), AA (sf), A (sf), and BBB (low) (sf), respectively, and upgraded its rating of the Class D Notes to BBB (high) (sf) from BBB (sf).

The last rating action on DPF 2019-1 took place on 29 April 2021 when DBRS Morningstar confirmed its rating of the Class A Notes at AAA (sf), and upgraded its ratings of the Class B, Class C, Class D, and Class E Notes to AA (high) (sf), A (high) (sf), BBB (high) (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 each Issuer are as follows:

-- DPF 2017-1: Base case PD of 11.1%; base case LGD of 11.8%
-- DPF 2018-1: Base case PD of 8.7%; base case LGD of 10.2%
-- DPF 2019-1: Base case PD of 9.4%; base case LGD of 11.0%

-- 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 DPF 2017-1 Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the DPF 2017-1 Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the DPF 2017-1 Class A Notes would be expected to remain at AAA (sf).

DUTCH PROPERTY FINANCE 2017-1
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (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 (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (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 (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 (low) (sf)

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

Class E 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 (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (sf)

DUTCH PROPERTY FINANCE 2018-1
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

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

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (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 (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 A (low) (sf)

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

DUTCH PROPERTY FINANCE 2019-1
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (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 (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (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 (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)

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (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 BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

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

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
DPF 2017-1: 14 July 2017
DPF 2018-1: 28 August 2018
DPF 2019-1: 8 April 2019

DBRS Ratings GmbH
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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: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions
-- Master European Structured Finance Surveillance Methodology (8 February 2022),
https://www.dbrsmorningstar.com/research/392000/master-european-structured-finance-surveillance-methodology
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021),
https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers
-- European RMBS Insight Methodology (28 March 2022) and European Asset RMBS Insight Model v 5.4.3.2,
https://www.dbrsmorningstar.com/research/394309/european-rmbs-insight-methodology
-- European RMBS Insight: Dutch Addendum (7 March 2022),
https://www.dbrsmorningstar.com/research/393357/european-rmbs-insight-dutch-addendum
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021),
https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions
-- European CMBS Rating and Surveillance Methodology (17 December 2021),
https://www.dbrsmorningstar.com/research/389947/european-cmbs-rating-and-surveillance-methodology

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