DBRS Morningstar Confirms Ratings on Two Green Apple Transactions

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) ratings on the respective Class A notes issued by Green Apple 2019-I NHG B.V. (Green Apple 2019-1) and Green Apple 2021-I B.V. (Green Apple 2021-1).

The 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 April 2023 payment date of each transaction;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at the AAA (sf) rating level.

The ratings address the timely payment of interest and the ultimate repayment of principal on or by the legal final maturity date in January 2058 for Green Apple 2019-1 and in January 2060 for Green Apple 2021-1. The ratings do not address the timely payment of any Class A excess consideration amounts due after the first optional redemption date in January 2026 for Green Apple 2019-1 and in January 2028 for Green Apple 2021-1.

The transactions are static securitisations collateralised by Dutch residential mortgage loans granted by Argenta Spaarbank N.V. in the Netherlands. Quion Services B.V. acts as the subservicer for the mortgage pools. Green Apple 2019-1 closed in June 2019 with an initial portfolio balance of EUR 937.4 million, consisting entirely of mortgage loans backed by a Nationale Hypotheek Garantie (NHG) while Green Apple 2021-1 closed in June 2021 with an initial portfolio balance of EUR 744.6 million.

PORTFOLIO PERFORMANCE
Green Apple 2019-1:
As of April 2023 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 0.06%, 0.2%, and 0.05% of the outstanding principal balance, respectively, while loans more than 90 days delinquent represented 0.03%.

Green Apple 2021-1:
As of the April 2023 payment date, there were no delinquent loans.

For both transactions, there have not been any foreclosed mortgage loans to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pools of receivables in both transactions. For Green Apple 2019-1, DBRS Morningstar updated its base case PD and LGD assumptions to 0.8% and 2.5%, respectively. For Green Apple 2021-1, DBRS Morningstar updated its base case PD and LGD assumptions to 1.1% and 10.0%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective Class B notes and cash reserve provide credit enhancement to the Class A notes in each transaction.

As of the April 2023 payment date, credit enhancement to the Class A notes in Green Apple 2019-1 increased to 22.5% from 19.1% at the time of the last annual review 12 months ago while credit enhancement to the Class A notes in Green Apple 2021-1 increased to 16.7% from 15.1% at the time of DBRS Morningstar’s initial rating 12 months ago.

The transactions benefit from a nonamortising cash reserve, funded at closing to EUR 12.2 million for Green Apple 2019-1 and EUR 9.7 million for Green Apple 2021-1, using the proceeds of the Class C notes. The reserve provides credit and liquidity support to the Class A notes and is available to cover senior expenses and Class A interest payments as well as to clear any debit amounts on the Class A principal deficiency ledger. As of the April 2023 payment date, the reserve for Green Apple 2019-1 was at its target balance. The reserve for Green Apple 2021-1 was slightly below its target balance at EUR 9.5 million because of the current negative excess spread in the transaction due to an interest rate mismatch, as the Class A notes pay a coupon linked to three-month Euribor while almost the entire portfolio consists of fixed-rate mortgages with long-term resets. This interest rate mismatch is partially mitigated by the presence of an interest rate cap agreement with a strike rate at 2.0%.

Additionally, the transactions benefit from liquidity support provided by a cash advance facility extended by BNG Bank N.V. (BNG Bank), with a maximum drawable amount equal to 1.5% of the outstanding Class A and Class B notes’ balance, subject to a floor of EUR 9.4 million for Green Apple 2019-1 and EUR 5.6 million for Green Apple 2021-1.

BNG Bank acts as the account bank for the transactions. Based on DBRS Morningstar’s private rating on BNG Bank, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, 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 in both transactions, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

ABN AMRO Bank N.V. (ABN AMRO) acts as the interest rate cap provider for Green Apple 2019-1 while Société Générale, S.A. (Société Générale) acts as the interest rate cap provider for Green Apple 2021-1. DBRS Morningstar's Long Term Critical Obligations Ratings of AA on both ABN AMRO and Société Générale are consistent with the first rating threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Social (S) Factors
In Green Apple 2019-1, DBRS Morningstar considered the presence of 100% of loans backed by the NHG guarantee to be a relevant rating factor (Social Impact of Product & Services) as outlined within the “DBRS Morningstar Criteria: 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, but it did not affect the rating on the Class A notes in this transaction.

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

In Green Apple 2021-1, there were no Environmental/Social/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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transactions’ structures in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in these transactions are listed at the end of this press release.

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 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: 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 these ratings include investor and servicer 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 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 purpose 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 the transactions took place on 17 June 2022, when DBRS Morningstar confirmed its ratings on the respective Class A notes at AAA (sf).

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 transactions’ parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (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.
-- For Green Apple 2019-1, the base case PD and LGD of the current pool of loans for the Issuer are 0.8% and 2.5%, respectively.
-- For Green Apple 2021-1, the base case PD and LGD of the current pool of loans for the Issuer are 1.1% and 10.0%, 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 on the Green Apple 2019-1 Class A notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating on the Green Apple 2019-1 Class A notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating on the Green Apple 2019-1 Class A notes would be expected to remain at AAA (sf).

Green Apple 2019-1:
Class A 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)

Green Apple 2021-1:
Class A 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)

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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates: 4 June 2019 (Green Apple 2019-1), 26 May 2021 (Green Apple 2021-1)

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 these transactions 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 (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- 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.
-- 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.
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight Model v5.8.0.0,
https://www.dbrsmorningstar.com/research/411634/european-rmbs-insight-methodology.
-- European RMBS Insight: Dutch Addendum (24 April 2023),
https://www.dbrsmorningstar.com/research/413034/european-rmbs-insight-dutch-addendum.
-- 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.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https://www.dbrsmorningstar.com/research/384624/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 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].