DBRS Morningstar Confirms Credit Ratings on Bastion 2022-1 NHG B.V.

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) credit ratings on the Class A1 and Class A2 notes (together, the Class A notes) issued by Bastion 2022-1 NHG B.V. (the Issuer).

The credit ratings on the Class A notes address the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date.

The credit rating confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the August 2023 payment date.
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AAA (sf) credit rating level.

The transaction is a securitisation of Dutch prime residential mortgages secured by owner-occupied properties and originated by HollandWoont B.V., which also services the portfolio. Quion Services B.V. acts as the subservicer.

PORTFOLIO PERFORMANCE
As of 31 July 2023, loans two to three months in arrears represented 0.2% of the outstanding portfolio balance, and loans at least three months in arrears represented 0.0% of the outstanding portfolio balance. Cumulative net losses were zero.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions at the B (sf) credit rating level to 1.9% and 5.2%, respectively.

CREDIT ENHANCEMENT
As of the August 2023 payment date, credit enhancement available to the Class A1 and Class A2 notes were 33.3% and 12.3%, respectively, up from 31.0% and 10.5%, respectively, at the DBRS Morningstar initial credit rating. Credit enhancement consists of subordination of the junior notes and a general reserve fund.

The nonamortising general reserve fund covers senior fees, senior swap payments, interest on the Class A notes, and principal losses via the principal deficiency ledger on the Class A notes. It is currently funded to its target level of EUR 5.3 million, equal to 1.25% of the Class A and Class B notes’ aggregate initial balance.

The transaction also benefits from a renewable cash advance facility (CAF) provided by BNG Bank N.V. (BNG) equal to 1.5% of the outstanding Class A notes balance, subject to a floor of 1.0% of the initial Class A notes balance. The maximum available amount of the CAF is currently EUR 7.0 million and can be drawn on to cover senior fees, senior swap payments, and Class A interest.

BNG acts as the account bank for the transaction. Based on the DBRS Morningstar private credit rating of BNG, 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 credit ratings assigned to the Class A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Coöperatieve Rabobank U.A. (Rabobank) acts as the swap counterparty for the transaction. DBRS Morningstar's public Long Term Critical Obligations Rating of Rabobank at AA (high) is consistent with the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar’s credit ratings on the notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit ratings on the notes also address the credit risk associated with the increased rate of interest applicable to the notes if the notes are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction documents.

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Social (S) Factors
DBRS Morningstar considers the Nationale Hypotheek Garantie (NHG) guarantee backing the mortgage loans in the collateral pool to be a significant social factor (Social Impact of Product & Services) as outlined in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings”. DBRS Morningstar assumed reduced loss severity for loans backed by an NHG guarantee as outlined in its “European RMBS Insight: Dutch Addendum” methodology. This is credit positive and affects the rating. Please also refer to https://www.dbrsmorningstar.com/research/366268/nhg-a-dutch-loan-guarantee-program-that-is-both-socially-supportive-and-credit-positive for more details.

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/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the “Master European Structured Finance Surveillance Methodology” (22 October 2023), https://www.dbrsmorningstar.com/research/422281/master-european-structured-finance-surveillance-methodology.

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

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

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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/421590/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 credit rating include investor 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 credit ratings, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the credit rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 29 November 2022, when DBRS Morningstar finalised its provisional credit ratings on the Class A1 and Class A2 notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS Morningstar credit 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 credit rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit 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 at the B (sf) credit rating level are 1.9% and 5.2%, respectively.
-- The risk sensitivity overview below illustrates the credit 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 credit rating on the Class A notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the credit rating on the 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 credit rating on the Class A notes would be expected to remain at AAA (sf).

Class A1 and Class A2 Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit 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://registers.esma.europa.eu/cerep-publication. 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 credit 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 Date: 23 November 2022

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 credit 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 (30 June 2023), https://www.dbrsmorningstar.com/research/416730/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (22 October 2023), https://www.dbrsmorningstar.com/research/422281/master-european-structured-finance-surveillance-methodology.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023),
https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://www.dbrsmorningstar.com/research/420572/operational-risk-assessment-for-european-structured-finance-servicers.
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight Model v6.0.1.0, 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 (15 September 2023), https://www.dbrsmorningstar.com/research/420602/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://www.dbrsmorningstar.com/research/420754/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].