Morningstar DBRS Confirms Credit Ratings on Bastion 2022-1 NHG B.V.

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit ratings on the Class A1 and Class A2 notes (together the Class A notes) issued by Bastion 2022-1 NHG B.V. (the Issuer).

The credit ratings on the Class A notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

CREDIT RATING RATIONALE
The credit rating actions 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 August 2024 payment date;
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the Class A notes to cover the expected losses at their AAA (sf) credit rating level.

The transaction is a securitisation of Dutch prime residential mortgages secured by owner-occupied properties and originated by HollandWoont B.V., which also services the portfolio. Quion Services B.V. acts as the subservicer.

PORTFOLIO PERFORMANCE
As of 31 July 2024, loans two to three months in arrears and loans more than three months in arrears both represented 0.0% of the outstanding portfolio balance, unchanged from one year prior. Cumulative net losses were zero.

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 at the B (sf) rating level to 1.0% and 4.5% respectively.

CREDIT ENHANCEMENT
As of the August 2024 payment date, credit enhancement to the Class A1 notes was 32.8%, up from 31.0% at the Morningstar DBRS initial rating. Credit enhancement to the Class A2 notes was 11.3%, up from 10.5% at the Morningstar DBRS initial rating. Credit enhancement consists of subordination of the junior notes and a general reserve fund.

The non-amortising general reserve fund covers senior fees, senior swap payments, interest on the Class A notes, and principal losses via the principal deficiency ledger on the Class A notes. It is currently funded to its target level of EUR 5.3 million, equal to 1.25% of the Class A and Class B notes' aggregate initial balance.

The transaction also benefits from a renewable cash advance facility (CAF) provided by BNG Bank N.V. (BNG) equal to 1.5% of the outstanding Class A notes balance, subject to a floor of 1.0% of the initial Class A notes balance. The maximum available amount of the CAF is currently EUR 6.8 million and can be drawn on to cover senior fees, senior swap payments, and Class A interest.

BNG acts as the account bank for the transaction. Based on the Morningstar DBRS private credit rating of BNG, 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 credit ratings assigned to the Class A notes, as described in Morningstar DBRS's "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

MeDirect Bank NV/SA (MeDirect) acts as the swap counterparty for the transaction, and Coöperatieve Rabobank U.A. (Rabobank) acts as the back-up swap counterparty and credit support provider. MeDirect is not rated by Morningstar DBRS; however, Morningstar DBRS' public Long-Term Critical Obligations Rating of Rabobank at AA (high) is consistent with the First Rating Threshold as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS's 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's 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
Social (S) Factors
Morningstar DBRS considers that the Nationale Hypotheek Garantie (NHG) guarantee backing the loans in the pool is a relevant Social factor (Social Impact of Product & Services) as outlined within the Morningstar DBRS' framework - "Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings". Morningstar DBRS assumed reduced loss severity for loans backed by an NHG guarantee as outlined in its "European RMBS Insight: Dutch Addendum" methodology. The NHG guarantee is credit positive. Morningstar DBRS previously considered this to be a significant social factor for this transaction as it affected the ratings; however, the presence of the NHG no longer affects the AAA (sf) credit rating on the Class A notes because of a decrease in the PDs and LGDs for the remaining collateral portfolio, and an increase in credit enhancement to the Class A notes. Please also refer to https://dbrs.morningstar.com/research/366268 for more details.

There were no Environmental/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 ratings 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.

Morningstar DBRS conducted a review of the transaction legal documents in the context of an amendment to the transaction in December 2023, which involved the novation of the interest rate swap agreement from Rabobank to MeDirect. Rabobank was appointed as the back-up swap counterparty and also acts as the credit support provider under the amended swap structure.

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 these credit ratings 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 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 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 action on this transaction took place on 27 November 2023, when Morningstar DBRS confirmed its AAA (sf) credit rating on the Class A notes.

Information regarding Morningstar DBRS credit ratings, including definitions, policies and methodologies is available at 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 at the B (sf) credit rating level are 1.0% and 4.5%, 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 A1 and Class A2 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.

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, Associate Managing Director
Initial Rating Date: 23 November 2022

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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.

-- 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/.
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024),
https://dbrs.morningstar.com/research/439571/.
-- European RMBS Insight Methodology and European RMBS Insight Model v10.0.0.0 (18 September 2024),
https://dbrs.morningstar.com/research/439573/.
-- European RMBS Insight: Dutch Addendum (11 September 2024),
https://dbrs.morningstar.com/research/439269/.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://dbrs.morningstar.com/research/439913/.

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.