Morningstar DBRS Confirms Credit Rating on Wendelstein 2017-1 UG (haftungsbeschränkt)

DBRS Ratings GmbH (Morningstar DBRS) confirmed its A (high) (sf) credit rating on the Class A Notes issued by Wendelstein 2017-1 UG (haftungsbeschränkt) (the Issuer).

The credit rating addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in December 2081.

CREDIT RATING RATIONALE
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 September 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the collateral pool;
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the A (high) (sf) credit rating level; and
-- Absence of revolving termination events.

The transaction is a securitisation of German mortgage loans originated and serviced by DB AG and its subsidiaries, Deutsche Bank Bauspar AG (DB Bauspar) and Deutsche Bank Privat- und Firmenkundenbank AG (DB Private). In May 2019, DB Bauspar integrated with BHW Bausparkasse AG and, in May 2020, DB Private merged into DB AG.

The transaction closed in November 2017 and included an initial three-year revolving period that was going to end in December 2020, but it was extended twice for additional three-year terms in November 2020 and November 2023. The revolving period is currently scheduled to terminate on 31 December 2026. During the revolving period, additional receivables can be added to the portfolio, subject to compliance with the substitution criteria.

PORTFOLIO PERFORMANCE
As of September 2024, loans that were two to three months in arrears represented 0.06% of the outstanding portfolio balance, down from 0.08% in September 2023. The 90+ days delinquency ratio increased to 0.09%, from 0.06% in the same period. The cumulative default ratio increased to 0.5% from 0.4%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the collateral pool and updated its base case PD and LGD assumptions to 3.7% and 22.3%, respectively, reflecting the potential portfolio migration based on replenishment criteria set forth in the transaction legal documents for the revolving period.

CREDIT ENHANCEMENT
As of the September 2024 payment date, credit enhancement to the Class A Notes remained at 8.0%, stable since Morningstar DBRS' initial credit rating, because the transaction remains in the revolving period.

The transaction benefits from a liquidity facility that currently totals EUR 216.2 million. The liquidity facility is available for the Issuer to meet any shortfalls in the payment of senior fees and interest on the Class A Notes.

DB AG acts as the account bank for the transaction. Based on DB AG's reference credit rating of A (high), which is one notch below its COR of AA (low), 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 A (high) (sf) credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal and 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, 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 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 the credit rating is: "Master European Structured Finance Surveillance Methodology" (19 November 2024), https://dbrs.morningstar.com/research/443204.

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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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 DB AG 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 rating, 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 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 this transaction took place on 30 November 2023, when Morningstar DBRS confirmed its credit rating on the Class A Notes at A (high) (sf), following a transaction amendment.

The lead analyst responsibilities for this transaction have been transferred to Baran Cetin.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://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 are 3.5% and 10.4%, 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 Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD, expected credit rating of A (high) (sf)
-- 50% increase in PD, expected credit rating of A (low) (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 BBB (high) (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)

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: Baran Cetin, Senior Analyst
Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Credit Rating Date: 20 November 2017

DBRS Ratings GmbH
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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.

-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196.
-- Master European Structured Finance Surveillance Methodology (19 November 2024), https://dbrs.morningstar.com/research/443204.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024),
https://dbrs.morningstar.com/research/437781.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913.
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571.
-- Common RMBS Rating Methodology (18 October 2024)
https://dbrs.morningstar.com/research/441432.

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.