Morningstar DBRS Confirms Credit Rating on Class A Notes Issued by Candide Financing 2021-1 B.V.

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A notes issued by Candide Financing 2021-1 B.V. (the Issuer).

The credit rating on the Class A notes addresses the timely payment of interest and the ultimate payment of principal by the legal final maturity date in November 2060.

The credit rating confirmation follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the August 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 Class A notes to cover the expected losses at the AAA (sf) credit rating level.

The transaction is a securitisation of a portfolio of Dutch first-lien residential mortgage loans secured by owner-occupied residential properties located in the Netherlands. The mortgage loans were originated by Lloyds Bank GmbH-Amsterdam branch, Lloyds Hypotheken BV, and the Bank of Scotland Plc-Amsterdam branch and sold by Lloyds Bank GmbH.

PORTFOLIO PERFORMANCE
As of the August 2024 payment date, loans two to three months and more than three months in arrears represented 0.0% of the outstanding portfolio balance, unchanged since the last annual review. The cumulative default ratio also remained at 0.0% over the same period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated the base case PD and LGD assumptions to 0.5% and 5.3%, respectively.

CREDIT ENHANCEMENT
Credit enhancement to the Class A notes is provided by subordination of junior notes and a nonamortising reserve fund. Due to the amortisation of the Class A notes, its credit enhancement increased to 6.6% from 6.1% last year.

The transaction benefits from a nonamortising reserve fund, funded at 0.75% of the Class A and Class B notes' initial balance. The reserve fund is available to cover senior fees and interest shortfalls on the Class A notes. As of August 2024, the reserve fund was at its initial level of EUR 3.9 million.

Further liquidity support for the Class A notes is provided through a cash advance facility, along with a priority of payments allowing principal to be borrowed to support revenue items with a corresponding debit to the appropriate principal deficiency ledger. The cash advance facility will amortise with no performance conditions attached and is funded at 1.0% of the Class A notes' outstanding balance with a floor of 0.5% of the Class A notes' initial balance. The cash advance facility is a renewable facility until the first optional repayment date (FORD).

BNG Bank N.V. acts as the account bank for the Issuer. Based on Morningstar DBRS' private credit rating on the account bank, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risks arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Lloyds Bank plc acts as the swap counterparty to the Issuer. Morningstar DBRS' Long Term Critical Obligations Rating of AA (high) on Lloyds Bank plc 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 applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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, GOVERNANCE CONSIDERATIONS
Social (S) Factors
Around 56% of the pool consists of loans backed by the Dutch National Mortgage Guarantee (Nationale Hypotheek Garantie, or NHG) scheme. Morningstar DBRS considers the scheme to be a relevant social factor (Social Impact of Product & Services) as outlined within the Morningstar DBRS framework. Morningstar DBRS assumed reduced loss severity for loans backed by the NHG guarantee as outlined in its "European RMBS Insight: Dutch Addendum" methodology. This is credit positive but did not affect the credit rating. Please also refer to https://www.dbrsmorningstar.com/research/366268 for more details.

There were no Environmental/Governance factors that had a significant or relevant impact 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 Factors in Credit Ratings at: https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to these credit ratings is "Master European Structured Finance Surveillance Methodology" (6 August 2024), https://dbrs.morningstar.com/research/437540.

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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

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.

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

At the time of the initial rating, Morningstar DBRS was supplied with third-party assessment. However, this did not impact the rating analysis.

Morningstar DBRS considers the data and information available to it for the purpose of providing this credit rating 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 the transaction took place on 17 November 2023, when Morningstar DBRS confirmed its credit rating on the Class A notes at AAA (sf).

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

Sensitivity Analysis: To assess the impact of changing the transaction's 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 of 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 rating.
-- The base case PD and LGD assumptions for the collateral pool are 0.5% and 5.3%, 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 assumptions.

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 AAA (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.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.
Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 2 November 2021

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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 (6 August 2024),
https://dbrs.morningstar.com/research/437540.
-- European RMBS Insight Methodology (18 September 2024) and European RMBS Insight Model v10.0.0.0, 
https://dbrs.morningstar.com/research/439573
-- European RMBS Insight: Dutch Addendum (11 September 2024),
https://dbrs.morningstar.com/research/439269
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://dbrs.morningstar.com/research/439913
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024),
https://dbrs.morningstar.com/research/439043
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781

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/439604.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.