DBRS Morningstar Confirms Rating on Sinopel 2019 B.V. Following Amendment

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

The rating addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in October 2064.

The rating confirmation is based on the following analytical considerations:
-- An amendment to the transaction executed on 29 November 2022;
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the October 2022 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the current portfolio of receivables; and
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AAA (sf) rating level.

THE AMENDMENT
On 29 November 2022 (the notes increase date) the Issuer executed an amendment to the transaction. The amendment entails the following changes:
-- EUR 1,075,649,748.00 were used to purchase new mortgage receivables from the seller on the notes increase date;
-- The Class A and Class B notes balance increased to EUR 1,597.4 million and EUR 84.2 million, respectively;
-- The final maturity date and the first optional redemption date (FORD) were extended to October 2064 and April 2029, respectively, from July 2061 and October 2025, respectively; and,
-- The cash advance facility target amount has reduced to 0.3% from 1.0% of the Class A notes’ outstanding balance and the floor has reduced to 0.175% from 0.6% of the Class A notes’ balance on the closing date.
These changes are effective from the notes increase date.

The transaction, which closed in 2019, is a securitisation of prime residential mortgages originated by Triodos Bank N.V. (Triodos) and secured over properties in the Netherlands. Triodos lends with an underlying mission to add environmental or social value. It acts as the master servicer, but delegates primary servicing to Stater Nederland B.V. and Hypocasso B.V. Hypocasso B.V. was appointed as subservicer on 1 May 2020 and is also responsible for special servicing.

PORTFOLIO PERFORMANCE
As of the October 2022 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 0.05%, 0.13%, and 0.03% of the outstanding principal balance, respectively, while loans more than 90 days delinquent amounted to 0.01%. There has 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 based on the updated loan-by-loan tape including the new mortgage receivables and has updated its base case PD and LGD assumptions to 1.5% and 9.7%, respectively.

CREDIT ENHANCEMENT
The subordination of the Class B notes provides credit enhancement to the Class A notes. Following the notes increase date, credit enhancement to the Class A notes was equal to 5.0%, same as closing, and down from 7.0% as of the October 2022 payment date, prior to the amendment.

The transaction benefits from liquidity support provided by the cash advance facility extended by Coöperatieve Rabobank U.A., with a maximum drawable amount equal to 0.30% of the outstanding Class A notes balance, subject to a floor of EUR 1.40 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.’s reference rating of AA, which is one notch below its DBRS Morningstar’s Long Term Critical Obligations Rating of AA (high), 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.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS

Social (S) Factors
DBRS Morningstar considered the presence of 9.2% of loans backed by the Nationale Hypotheek Garantie (NHG) guarantee to be a relevant rating factor (Social Impact of Product & Services) as outlined within the “DBRS Morningstar’s Approach to Environmental, Social and Governance Risk Factors in Credit Ratings” framework. DBRS Morningstar assumed reduced loss severities for loans backed by an NHG guarantee as outlined in its “European RMBS Insight: Dutch Addendum”. This is credit positive; however, it did not affect the rating of the Class A notes.

There were no Environmental/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (17 May 2022).

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the rating are the “Master European Structured Finance Surveillance Methodology” (19 May 2022), the “European RMBS Insight Methodology” (28 March 2022), and the “European RMBS Insight: Dutch Addendum” (7 March 2022).

Other methodologies referenced in this transaction 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 transaction in accordance with the principal methodology.

In the context of the amendment, DBRS Morningstar conducted a review of the amended transaction documents including the master amendment agreement, rated notes condition, and the junior notes condition. A review of any other transaction legal documents was not conducted as these 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: https://www.dbrsmorningstar.com/research/401817/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 this rating include investor and servicer reports provided by Intertrust Administrative Services B.V. (the Issuer Administrator) and loan-level data provided by Triodos and the European DataWarehouse GmbH. In the context of the amendment, DBRS Morningstar was also provided with updated historical performance data from Triodos as follows:
-- Dynamic quarterly delinquency data from January 2012 to September 2022;
-- Loan level data on foreclosures from August 2007 to October 2022; and,
-- Historical interest rates from February 2013 to October 2022.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating and in the context of the amendment, 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 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.

The last rating action on this transaction took place on 23 June 2022, when DBRS Morningstar confirmed its AAA (sf) rating on the Class A notes.

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

Sensitivity Analysis: 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 1.3% and 9.9%, 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 (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to A (high) (sf), assuming no change in the LGD. 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 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 (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (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: https://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.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Preben Cornelius Overas, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 19 July 2019

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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 (22 July 2022),
https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions
-- Master European Structured Finance Surveillance Methodology (19 May 2022),
https://www.dbrsmorningstar.com/research/397033/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),
https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- European RMBS Insight Methodology (28 March 2022) and European RMBS Insight Model v5.7.1.0,
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.

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].