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

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes issued by Dutch Property Finance 2019-1 B.V. (DPF 2019-1) and Dutch Property Finance 2022-1 B.V. (DPF 2022-1):

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

DPF 2022-1:
-- Class A confirmed at AAA (sf)
-- Class B confirmed at AA (sf)
-- Class C upgraded to A (high) (sf) from A (sf)
-- Class D confirmed at BBB (sf)

The credit ratings on both Class A notes and the DPF 2019-1 Class B and DPF 2019-1 Class C notes address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. The credit ratings on the DPF 2022-1 Class B, DPF 2022-1 Class C, both Class D notes, and the DPF 2019-1 Class E notes address the timely payment of interest while the senior-most class outstanding, otherwise the ultimate payment of interest, and the ultimate payment of principal on or before the legal final maturity date.

The credit rating actions 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 2024 payment date;
-- 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 their respective credit rating levels.

The transactions are securitisations of mortgage loans secured against buy-to-let residential, mixed-use, and commercial real estate properties located in the Netherlands. RNHB B.V. either originated or acquired the mortgage loans and Vesting Finance Servicing B.V. services the portfolios.

PORTFOLIO PERFORMANCE
DPF 2019-1:
As of the January 2024 payment date, loans two to three months arrears and more than three months in arrears were both 0.0% compared with 0.0% and 0.1% of the outstanding portfolio balance at the last annual review. The cumulative loss ratio was 0.0%.

DPF 2022-1:
As of the January 2024 payment date, loans two to three months in arrears and more than three months in arrears both represented 0.1% of the outstanding portfolio balance, up from 0.0% at the last annual review. The cumulative loss ratio was 0.0%.

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

DPF 2019-1: Base case PD of 6.9% and base case LGD of 10.3%
DPF 2022-1: Base case PD of 7.0% and base case LGD of 10.3%

CREDIT ENHANCEMENT
Credit enhancement to the rated notes is provided by the subordination of junior classes (except Class G in DPF 2019-1 and Class F, Class X, and Class R in DPF 2022-1) and a reserve fund. As of the January 2024 payment date, CE increased as follows in each transaction since the last annual review:

--DPF 2019-1:
CE to the Class A Notes to 82.1% from 68.7%,
CE to the Class B Notes to 48.0% from 40.2%,
CE to the Class C Notes to 35.4% from 29.6%,
CE to the Class D Notes to 22.3% from 18.6%, and
CE to the Class E Notes to 16.0% from 13.4%.

--DPF 2022-1:
CE to the Class A to 24.0% from 21.9%,
CE to the Class B to 15.9% from 14.5%,
CE to the Class C to 11.3% from 10.3%, and
CE to the Class D to 5.8% from 5.3%.

Each transaction benefits from a non-amortising reserve fund available to cover senior fees, interest, and principal (via the principal deficiency ledgers (PDLs)) on the rated notes. As of the January 2024 payment date, the reserves were at their target level of approximately EUR 8.0 million in DPF 2019-1 and EUR 9.0 million in DPF 2022-1. As of the January 2024 payment date, the PDLs were clear in both transactions.

As of the January 2024 payment date, cumulative deferred interest on Class E and Class F in DPF 2022-1 was at approximately EUR 1.4 million and EUR 1.1 million, respectively. Morningstar DBRS does not rate the Class E and Class F in DPF 2022-1. There was no deferred interest in DPF 2019-1 as of the January 2024 payment date.

Elavon Financial Services DAC (Elavon) acts as the account bank for each transaction. Based on Morningstar DBRS’ private credit rating on Elavon, the downgrade provisions outlined in the transactions’ documents, and other mitigating factors inherent in the transactions’ structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes in each transaction as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

NatWest Markets Plc (NatWest) acts as the swap counterparty for each transaction. Morningstar DBRS' public Long Term Critical Obligations Rating of A (high) on NatWest is above the first credit rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

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

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

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030.

Morningstar DBRS 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: Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051.

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

Morningstar DBRS 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 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://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include investor reports provided by Elavon, UK Branch; loan-level data, property-level data and additional information provided by RNHB B.V.; and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial credit ratings, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

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

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

The last credit rating actions on these transactions took place on 20 April 2023, when Morningstar DBRS took the following credit rating actions:
--DPF 2019-1: Morningstar DBRS confirmed its credit ratings on the Class A and Class B notes at AAA (sf) and AA (high) (sf), respectively, and upgraded its credit ratings on the Class C, Class D, and Class E notes to AA (sf), AA (low) (sf), and A (high) (sf), respectively, from A (high) (sf), A (high) (sf), and BBB (high) (sf), respectively.
--DPF 2022-1: Morningstar DBRS confirmed its credit ratings on the Class A, Class B, Class C, and Class D notes at AAA (sf), AA (sf), A (sf), and BBB (sf), respectively.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

-- Morningstar DBRS 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 at the B (sf) credit rating level for each Issuer are as follows:

DPF 2019-1: Base case PD of 6.9%; base case LGD of 10.3%
DPF 2022-1: Base case PD of 7.0%; base case LGD of 10.3%

-- 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.

DPF 2019-1
Class A Notes 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)

Class B Notes 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)

Class C Notes 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)

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

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

DPF 2022-1
Class A 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 AA (high) (sf)

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

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

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

For further information on Morningstar DBRS 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 Morningstar DBRS 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: Rehanna Sameja, Senior Vice President
Initial Rating Date:
DPF 2019-1: 8 April 2019
DPF 2022-1: 29 March 2022

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 credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

--Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051
--European RMBS Insight Methodology (27 March 2023) and European Asset RMBS Insight Model v 6.0.2.0,
https://dbrs.morningstar.com/research/411634
--European RMBS Insight: Dutch Addendum (11 March 2024),
https://dbrs.morningstar.com/research/429169
--Interest Rate Stresses for European Structured Finance Transactions (15 September 2023),
https://dbrs.morningstar.com/research/420602
--Derivative Criteria for European Structured Finance Transactions (18 September 2023),
https://dbrs.morningstar.com/research/420754
--Legal Criteria for European Structured Finance Transactions (30 June 2023),
https://dbrs.morningstar.com/research/416730
--Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://dbrs.morningstar.com/research/420572
--Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024),
https://dbrs.morningstar.com/research/427030

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/278375.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at [email protected].