Morningstar DBRS Assigns Provisional Credit Rating to Weser Funding S.A., acting in respect of its Compartment No. R 2025-1

DBRS Ratings GmbH (Morningstar DBRS) assigned a provisional credit rating to the Class A notes to be issued by Weser Funding S.A., acting in respect of its Compartment No. R 2025-1 (Weser Funding 2025-1 or the Issuer):

-- Class A at (P) AAA (sf)

The provisional credit rating on the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the final maturity date. Morningstar DBRS does not rate the Class B and Class C notes also expected to be issued in the transaction.

CREDIT RATING RATIONALE
The Issuer is a bankruptcy-remote special-purpose vehicle incorporated in the Netherlands. Weser Funding 2025-1 will issue two classes of collateralised notes (the Class A notes and the Class B notes) to finance the purchase of Dutch residential mortgage loans secured over first-lien, owner-occupied properties in the Netherlands. Additionally, Weser Funding 2025-1 will issue the noncollateralised Class C notes (together with the Class A and B notes, the notes) to fund the reserve fund and the initial swap payment. The Class A notes benefit from a 6.0% credit support from the subordinated Class B and the reserve fund.

The issuance structure includes a reserve fund and a cash advance facility agreement, funded as an undrawn commitment, with the reserve fund giving interest and credit support to the Class A notes and the cash advance facility supporting interest payments for the Class A notes. The reserve fund will be sized at 1.0% of the Class A and Class B notes' outstanding balances at closing and will be nonamortising. Once the Class A notes have been redeemed in full, the reserve fund will be set to zero and any excess amounts will be released to the available revenue funds. The cash advance facility will be equal to 1.0% of the Class A notes' outstanding balance with a floor at 0.75% of the Class A notes' outstanding balance at closing; it will therefore amortise in line with the Class A notes. Any excess amounts will be part of available revenue funds. The Issuer can make drawings if the cash advance facility is renewed following the cash advance facility commitment termination date, which is one year after closing. Furthermore, principal funds can be used to pay Class A interest after making use of the reserve fund and after the cash advance facility has been fully drawn.

The loans pay a fixed rate of interest with resets from time to time. In contrast, the notes pay an interest rate linked to three-months Euribor, which resets on a quarterly basis. The Issuer's fixed-to-floating risk exposure will be hedged through a balance-guaranteed swap agreement with BNP Paribas S.A. (BNP Paribas), which Morningstar DBRS rates with a long-term and short-term Critical Obligations Rating (COR) of AA (high) and R-1 (high), respectively, with Stable trends. BNP Paribas will pay the Issuer the swap notional amount, defined as the Class A outstanding principal balance, multiplied by three-month Euribor. The Issuer will pay BNP Paribas an amount equal to the swap notional amount multiplied by the swap rate. The swap documents are in line with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Oldenburgische Landesbank AG (OLB) will act as the seller and servicer in this transaction. Tulp Hypotheken B.V. (Tulp) will act as subservicer with Stater Nederland B.V. as delegated subservicer.

Since 2022, OLB has offered its mortgage financing for residential real estate outside Germany after signing a co-operation agreement with Tulp in Oldenburg, Germany. On Tulp's independent lending platform, OLB acts as both the legal lender and financing partner for mortgage loans for private customers in the Netherlands. As is common in the Netherlands, the loans are sold primarily through independent financial advisors.

Following the first optional redemption date, which falls in April 2031, the margin payable on the Class A notes will increase. Morningstar DBRS has addressed this in its analysis.

As of 31 October 2024, the provisional portfolio consisted of 3,156 loan parts extended to 2,085 borrowers with an aggregate principal balance of EUR 554.7 million and comprised entirely of Nationale Hypotheek Garantie (NHG) mortgage loans. The provisional portfolio consisted of 83.8% fixed-rate loans with resets and 16.2% fixed-rate loans for life, with the entire portfolio comprising loans classified as owner occupied. Furthermore, 97.9% of the loans repay on a capital-plus-interest basis with the remainder being interest-only (IO) loans (2.1%), and 95.2% of the loans were granted to employed borrowers. As of the provisional cut-off date, all mortgage loans were performing.

A principal deficiency ledger comprising two subledgers is envisaged, corresponding to each class of collateralised notes (Class A and Class B notes), and is used in the structure to provide for realised losses and revenue shortfall amounts. Amounts are debited to the subledgers in reverse sequential order.

The Issuer account bank will be BNG Bank N.V.. Based on Morningstar DBRS' private credit rating on the Issuer account bank, the downgrade provisions outlined in the transaction documents, and the structural mitigants, Morningstar DBRS considers the risk arising from exposure to the Issuer account bank to be consistent with the credit rating assigned to the notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit rating on the Class A notes addresses 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 on the Class A notes also addresses the credit risk associated with the increased rate of interest applicable to the Class A notes if the Class A notes are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction document(s).

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) 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
Social (S) Factors
The following Social factor had a significant effect on the credit analysis: Morningstar DBRS considers that the NHG guarantee backing the loans in the pool is a significant Social factor for the credit rating action. Morningstar DBRS assumed reduced loss severity for loans backed by an NHG guarantee as outlined in its European RMBS Insight Methodology. The NHG guarantee is credit positive. Morningstar DBRS considers this to be a significant Social factor for this transaction as the NHG guarantee affects the credit rating on the Class A notes; if the loans were not backed by the NHG guarantee, the credit rating on the Class A notes would be lower.

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 (13 August, 2024) https://dbrs.morningstar.com/research/437781 .

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 methodology applicable to the credit rating is: European RMBS Insight Methodology (3 December 2024) https://dbrs.morningstar.com/research/444100.

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.

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 OLB, Tulp, and ABN AMRO Bank N.V. Morningstar DBRS was provided with a provisional loan-by-loan data tape as at 31 October 2024, as well as the following historical data:
-- Dynamic monthly delinquency data from August 2022 until August 2024
-- Dynamic monthly prepayment data from August 2022 until August 2024
-- Static annual default data from 2022 until 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 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned security and may change or be different than the final credit rating assigned or may be discontinued. The assignment of a final credit rating on the above-mentioned security is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit rating.

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

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):

-- In respect of the Class A notes, a Probability of Default (PD) of 11.6% and LGD of 13.2%, corresponding to the AAA (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;
-- 50% increase of the PD, ceteris paribus, would not lead to a downgrade;
-- 25% increase of the LGD, ceteris paribus, would not lead to a downgrade;
-- 50% increase of the LGD, ceteris paribus, would not lead to a downgrade;
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would not lead to a downgrade;
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (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: Ronja Dahmen, Vice President
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 4 February 2025

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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.
European RMBS Insight model v. 10.1.0.0

Other methodologies referenced in this transaction are listed below:
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024)
https://dbrs.morningstar.com/research/443196
-- 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
-- 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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com