Morningstar DBRS Finalises Provisional Credit Ratings on Jubilee Place 6 B.V.

DBRS Ratings GmbH (Morningstar DBRS) finalised its provisional credit ratings on the residential mortgage-backed notes issued by Jubilee Place 6 B.V. (the Issuer) as follows:

-- Class A notes at AAA (sf)
-- Class B notes at AA (low) (sf)
-- Class C notes at A (high) (sf)
-- Class D notes at BBB (high) (sf)
-- Class E notes at BB (high) (sf)
-- Class X1 notes at BBB (sf)

The credit rating assigned to the Class E notes differ from the previously assigned provisional credit rating of BB (sf). This is because of the lower-than-expected margins of the liabilities, which improved the cash flow analysis of the notes in Morningstar DBRS' rating stress scenarios.

The credit rating on the Class A notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in September 2060. The credit rating on the Class B notes addresses the timely payment of interest when most senior and the ultimate payment of principal by the legal final maturity date. The credit ratings on the Class C, Class D, and Class X1 notes address the ultimate payment of interest and principal by the legal final maturity date. The credit rating on the Class E notes addresses the ultimate payment of principal by the legal final maturity date.

Morningstar DBRS does not rate the Class S1, Class S2, Class X2, or Class R notes also expected to be issued in this transaction.

CREDIT RATING RATIONALE
Jubilee Place 6 B.V. is a bankruptcy-remote special-purpose vehicle incorporated in the Netherlands. The Issuer used the proceeds from the issued notes to fund the purchase of Dutch mortgage receivables originated by Dutch Mortgage Services B.V., DNL 1 B.V., and Community Hypotheken B.V. (the originators), which were acquired from Citibank, N.A., London Branch (the seller).

The originators are specialised residential buy-to-let (BTL) real estate lenders operating in the Netherlands and started their lending businesses in 2019. They operate under the mandate of Citibank, which defines most of the underwriting criteria and policies.

As of 29 February 2024, the portfolio consisted of 804 loans with a total portfolio balance of approximately EUR 294.7 million. The weighted-average (WA) seasoning of the portfolio is 1.3 years with a WA remaining term of 32.2 years. The WA current loan-to-value ratio, at 67.8%, is in line with that of other Dutch BTL RMBS transactions. The loan parts in the portfolio are either interest-only loans (92.9%) or annuity mortgage loans (7.1%). A significant portion of the loans were granted for the purpose of equity release (48.0%). All of the loans in the portfolio are fixed with a compulsory future switch to floating. The notes pay a floating rate. To address this interest rate mismatch, the transaction is structured with a fixed-to-floating interest rate swap where the Issuer pays a fixed rate and receives three-month Euribor over a notional, which is a defined amortisation schedule. There are no loans in arrears in the portfolio.

Morningstar DBRS calculated the credit enhancement for the Class A notes at 10.65%, which is provided by the subordination of the Class B to Class E notes and the liquidity reserve fund. Credit enhancement for the Class B notes is 4.75% and is provided by the subordination of the Class C to Class E notes and the liquidity reserve fund. Credit enhancement for the Class C notes is 2.25% and is provided by the subordination of the Class D to Class E notes and the liquidity reserve fund. Credit enhancement for the Class D notes is 0.50% and is provided by the subordination of the Class E notes and the liquidity reserve fund. Credit enhancement for the Class E notes is 0.25% and is provided by the liquidity reserve fund.

The transaction benefits from an amortising liquidity reserve fund (LRF) that can be used to cover shortfalls on senior expenses and interest payments on the Class A notes and Class B notes once most senior. The LRF was partially funded at closing at 0.25% of (100/95) of the initial balance of the Class A and Class B notes and will build up until it reaches its target of 1.10% (100/95) of the outstanding balance of the Class A and Class B notes. The LRF is floored at 0.75% (100/95) of the initial balance of the Class A and Class B notes until the first optional redemption date. The LRF indirectly provides credit enhancement for all classes of notes, as released amounts will be part of the principal available funds.

Additionally, the notes are provided with liquidity support from principal receipts, which can be used to cover senior expenses and interest shortfalls on the Class A notes or the most-senior class of notes outstanding once the Class A notes have been fully amortised.

The Issuer entered into a fixed-to-floating swap with Citibank Europe plc (rated AA (low) with a Stable trend by Morningstar DBRS) to mitigate the fixed interest rate risk from the mortgage loans and the three-month Euribor payable on the loan and the notes. The notional of the swap is a pre-defined amortisation schedule of the assets. The Issuer will pay a fixed swap rate and receive three-month Euribor in return. The swap documents are in line with Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

The Issuer Account Bank is Citibank Europe plc, Netherlands Branch. Based on Morningstar DBRS' private credit rating on the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS based its credit ratings primarily on the following considerations:
-- The transaction capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- The credit quality of the mortgage loan portfolio and the ability of the servicer to perform collection activities. Morningstar DBRS calculated portfolio default rates (PDs), loss given default (LGD), and expected loss (EL) outputs on the mortgage loan portfolio.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay the notes according to the terms of the transaction documents. Morningstar DBRS analysed the transaction cash flows using the PD and LGD outputs provided by Morningstar DBRS' European RMBS Insight Model. Morningstar DBRS analysed transaction cash flows using Intex DealMaker.
-- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as
a downgrade and replacement language in the transaction documents.
-- The consistency of the transaction's legal structure with Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer.

Morningstar DBRS' credit ratings on the Class A to Class X1 notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Interest Payment Amounts and the related Class Balances.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents 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
General Considerations 
Environmental (E) Factors
Emissions, Effluents & Waste is a relevant ESG factor. A Green Energy Label discount of 0.10% is applied to the interest rate/interest rate margin of loans backed by properties with an energy label of A or B at origination. For loans associated with properties with an energy label below B, a 0.15% discount is applied to their rates where the energy label has improved at least one notch within the first six months since origination. The lower interest rate has a positive impact on our default assumptions.
 
There were no Social or 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 (23 January 2024).

Morningstar DBRS analysed the transaction structure in Intex DealMaker, considering the default rates at which the rated notes did not return all specified cash flows.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the credit ratings are European RMBS Insight Methodology (25 March 2024) and European RMBS Insight: Dutch Addendum (11 March 2024) and European RMBS Insight Model v. 7.0.0.0, https://dbrs.morningstar.com/research/430103 , https://dbrs.morningstar.com/research/429169

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.

Morningstar DBRS materially deviated from its "European RMBS Insight: Dutch Addendum" methodology when determining the credit ratings assigned to Class C, Class D, Class E, and Class X1 notes by applying a custom high CPR vector instead of the standard high CPR stress of 20% from day one. The material deviation is warranted given the concentration of fixed-rate loans with an early repayment charge during the fixed period in this portfolio. Hence, Morningstar DBRS expects prepayment rates to remain low during the fixed-rate period and increase when borrowers come to the end of their fixed-rate period. To reflect this, Morningstar DBRS assumed a custom high CPR vector with CPR rates below 20% while loans are in a fixed-rate period followed by a period of CPR rates exceeding 20% when most loans in the portfolio come to the end of the fixed-rate period.

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

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 Dutch Mortgage Services B.V., DNL 1 B.V., and Community Hypotheken B.V. and its agents. Morningstar DBRS was provided with loan-level data as of 29 February 2024 and historical performance data of the originator's loan book (outstanding balance, delinquencies by number of months in arrears, and total unscheduled periodic prepayments) from November 2019 to January 2024.

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

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.

This credit rating concerns an expected-to-be-issued new financial instrument. This is the first Morningstar DBRS credit rating on this financial instrument.

This is the first credit rating action since the Initial Credit Rating Date.

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 ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- In respect of the Class A notes, a PDR of 31.7% and LGD of 27.8%, corresponding to the AAA (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class B notes, a PDR of 26.6% and LGD of 21.5%, corresponding to the AA (low) (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class C notes, a PDR of 24.6% and LGD of 17.4%, corresponding to the A (high) (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class D notes, a PDR of 19.6% and LGD of 12.0%, corresponding to the BBB (high) (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class E notes, a PDR of 13.2% and LGD of 10.4%, corresponding to the BB (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class X1 notes, a PDR of 9.1% and LGD of 10.1%, corresponding to the BBB (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.

Morningstar DBRS concludes the following impact on the Class A notes:
-- 25% increase of the PD, ceteris paribus, would not lead to a downgrade of the Class A notes;
-- 50% increase of the PD, ceteris paribus, would not lead to a downgrade of the Class A notes;
-- 25% increase of the LGD, ceteris paribus, would not lead to a downgrade of the Class A notes;
-- 50% increase of the LGD, ceteris paribus, would not lead to a downgrade of the Class A notes;
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf).

Morningstar DBRS concludes the following impact on the Class B notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to A (low) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (low) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (sf).

Morningstar DBRS concludes the following impact on the Class C notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (low) (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (low) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).

Morningstar DBRS concludes the following impact on the Class D notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (low) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (sf).

Morningstar DBRS concludes the following impact on the Class E notes:
-- 25% increase of the PD, ceteris paribus, would not lead to a downgrade of the Class E Notes;
-- 50% increase of the PD, ceteris paribus, would not lead to a downgrade of the Class E Notes
-- 25% increase of the LGD, ceteris paribus, would not lead to a downgrade of the Class E Notes;
-- 50% increase of the LGD, ceteris paribus, would not lead to a downgrade of the Class E Notes;
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would not lead to a downgrade of the Class E Notes;
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would not lead to a downgrade of the Class E Notes;
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would not lead to a downgrade of the Class E Notes;
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (sf).

Morningstar DBRS concludes the following impact on the Class X1 notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BB (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (low) (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (low) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (low) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (low) (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: Alejandro Tendero Delicado, Assistant Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 4 April 2024

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://dbrs.morningstar.com/about/methodologies.

-- European RMBS Insight Methodology (25 March 2024) and European RMBS Insight Model v.7.0.0.0.,
https://dbrs.morningstar.com/research/430103
-- European RMBS Insight: Dutch Addendum (11 March 2024),
https://dbrs.morningstar.com/research/429169
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://dbrs.morningstar.com/research/420754
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024),
https://dbrs.morningstar.com/research/429054
-- 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].