Morningstar DBRS Confirms Credit Ratings on Jubilee Place 4 B.V.

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on the loan and notes issued by Jubilee Place 4 B.V. (the Issuer) as follow:

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

The credit rating on the Class A loan addresses the timely payment of interest and the ultimate payment of principal by the legal final maturity date in July 2059. 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 to Class E notes address the ultimate payment of interest and principal by the legal final maturity date. Morningstar DBRS does not rate the Class F, Class X, or Class R notes issued in this transaction.

The 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 April 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 rated loan and notes to cover the expected losses at their respective credit rating levels.

The Issuer is a bankruptcy-remote special-purpose vehicle incorporated in the Netherlands. The Issuer used the proceeds from the Class A loan and 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) and acquired from Citibank N.A./London Branch. The Originators are specialised residential buy-to-let real estate lenders operating in the Netherlands and started their lending businesses in 2019. They operate under the mandate of Citibank, N.A., which defines most of the underwriting criteria and policies.

PORTFOLIO PERFORMANCE
As of the April 2024 payment date, loans up to three months in arrears represented 0.27% of the outstanding portfolio balance, up from 0.15% at the previous annual review one year ago. The 90+ days delinquency ratio decreased to 0.00% from 0.07% and the cumulative default ratio remained at 0.00% in the same period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions, corresponding with the B (sf) credit rating level, to 9.9% and 10.0%, respectively.

CREDIT ENHANCEMENT
Credit enhancement for the Class A loan is 15.0%, provided by the subordination of the Class B to Class F notes.
Credit enhancement for the Class B notes is 8.6%, provided by the subordination of the Class C to Class F notes.
Credit enhancement for the Class C notes is 5.7%, provided by the subordination of the Class D to Class F notes.
Credit enhancement for the Class D notes is 3.6%, provided by the subordination of the Class E to Class F notes.
Credit enhancement for the Class E notes is 0.9%, provided by the subordination of the Class F notes.

At the previous annual review the credit enhancements to the loans and notes slightly decreased from the initial figures because of the build-up of the reserve fund, which was replenished from the principal collections. The credit enhancements continue to build up in line with the amortisation of the notes. As of the April 2024 payment date, the credit enhancements for the Class A loan and Class B notes are higher than their respective initial levels of 14.5% and 8.5%, respectively. The credit enhancements for the Classes C to Class E notes are still below their initial levels.

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 loan. The LRF was partially funded at closing at 0.5% of the initial balance of the Class A loan and was built up until it reached its target of 1% of the outstanding balance of the Class A loan. The LRF is floored at 0.5% of the initial balance of the Class A loan. The LRF indirectly provides credit enhancement to the Class A loan and all classes of notes, as released amounts are part of the principal available funds. As of the April 2024 payment date, the LRF was at EUR 3.0 million.

Citibank Europe plc - Netherlands Branch acts as the account bank for the transaction. Based on Morningstar DBRS’ private credit rating on the account bank provider, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the AAA (sf) credit rating assigned to the Class A loan, as described in Morningstar DBRS’ “Legal Criteria for European Structured Finance Transactions” methodology.

BNP Paribas SA (BNPP) acts as the interest rate swap counterparty for this transaction. Morningstar DBRS' public Long-Term Issuer Rating of AA (low) on BNPP is consistent with the first credit rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

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

Morningstar DBRS' 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.

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transactions documents that are not financial obligations.

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

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE 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 of origination. The lower interest rate has a positive impact on DBRS Morningstar’s default assumptions, but did not impact the credit ratings.

There were no 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 the “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 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://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include investor reports provided by Citibank, N.A. and loan-level data provided by EuroABS Ltd.

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 impact 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 action on this transaction took place on 22 June 2023, when Morningstar DBRS confirmed the credit ratings on the loan and notes.

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 for the Issuer at the B (sf) credit rating level are 9.9% and 10.0%, 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.

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

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

Class E Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of B (sf)
-- 50% increase in LGD, expected credit rating of B (low) (sf)
-- 25% increase in PD, expected credit rating of B (low) (sf)
-- 50% increase in PD, expected credit rating of CCC (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of CCC (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of CCC (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of CCC (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of CCC (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: Alfonso Candelas, Senior Vice President
Initial Rating Date: 10 June 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://www.dbrsmorningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051
-- 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
-- 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
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030
-- European RMBS Insight Methodology (25 March 2024) and European Asset RMBS Insight Model v 7.0.1.0,
https://dbrs.morningstar.com/research/430103
-- European RMBS Insight: Dutch Addendum (11 March 2024),
https://dbrs.morningstar.com/research/429169

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, please visit dbrs.morningstar.com or contact us at [email protected].