Morningstar DBRS Assigns Credit Rating to Belgian Lion NV/SA-Compartment Belgian Lion RMBS III

DBRS Ratings GmbH (Morningstar DBRS) assigned a credit rating of AAA (sf) to the Class A Notes issued by Belgian Lion NV/SA-Compartment Belgian Lion RMBS III (the Issuer).

The Class A Notes are issued for EUR 4,185,000,000, while the Class B Notes (not rated by Morningstar DBRS) are issued for EUR 315,000,000.

The credit ratings assigned to the Class A Notes address the timely payment of interest and the ultimate payment of principal on or before the final maturity date in February 2062.

At closing, the Class A Notes benefit from credit enhancement of 7.0%.

The portfolio consists of prime Belgian residential mortgage loans, mainly secured on holiday/second homes or buy-to-let properties, originated by ING Belgium NV/SA (ING Belgium), who also acts as Servicer of the pool.

During a five-year revolving period, the Issuer can use the principal collections to purchase subsequent portfolios, subject to portfolio limits and eligibility criteria.

The transaction structure benefits from a liquidity facility from ING Belgium. The facility, which provides liquidity support as it can be used to cover senior fees/expenses, swap payments, and interest on the Class A Notes in case of insufficient interest available funds, is equal to 0.5% of the outstanding balance of the Class A Notes and will have a floor of 0.1% of their initial balance.

As of 31 December 2024, the initial portfolio consisted of 36,450 mortgage loans granted to 23,626 borrowers. The current balance of the portfolio is EUR 4.5 billion and the average loan balance (per borrower) is EUR 189,531. The weighted-average (WA) seasoning of the portfolio is 4.8 years with a WA residual maturity of 13.5 years. The portfolio's WA loan-to-value ratio (calculated on the unindexed property value) is 50.0%. The portfolio is mainly distributed in the regions of Brussels (16.9%) and Antwerp (16.1%).

The portfolio mainly comprises fixed-for-life loans (91.2% of the pool balance), whereas a residual portion (8.8%) is represented by loans bearing a fixed rate with future resets.

A total return swap transaction has been entered into between the Issuer and ING Belgium to hedge against the interest rate risk arising from the mismatch between assets and liabilities (paying a floating-rate coupon, indexed to three-month Euribor). This transaction also guarantees an excess spread.

The transaction account bank is ING Belgium. Based on Morningstar DBRS' private credit rating on the account bank and the replacement provisions included in the transaction documents, Morningstar DBRS considers the risk of such counterparty to be consistent with the credit rating assigned, in accordance with its "Legal and Derivative Criteria for European Structured Finance Transactions".

Morningstar DBRS based its credit rating primarily on the following analytical considerations:
-- The transaction capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- The credit quality of the mortgage portfolio and the ability of the Servicer to perform collection and resolution activities. Morningstar DBRS calculated probability of default (PD), loss given default (LGD), and expected loss outputs on the mortgage portfolio, which Morningstar DBRS uses as inputs into its cash flow tool. Morningstar DBRS analysed the mortgage portfolio in accordance with its "Common RMBS Rating Methodology".
-- The transaction's ability to withstand stressed cash flow assumptions and repay investors in accordance with the terms and conditions of the notes. Morningstar DBRS analysed the transaction structure using Intex Dealmaker.
-- The consistency of the transaction's legal structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer.
-- The sovereign credit rating on the Kingdom of Belgium, rated AA with a Stable trend by Morningstar DBRS, as of the date of this press release.

Morningstar DBRS also ran additional cash flow sensitivity scenarios to test a shorter default timing distribution to assign its credit ratings.

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 principal amount.

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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit rating is the "Common RMBS Rating Methodology" (4 February 2025), https://dbrs.morningstar.com/research/447258.

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 considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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 historical performance data (static pool defaults and recoveries data from 2010 to 2023, dynamic delinquencies data from 2010 to 2024, and dynamic prepayments data from 2012 to 2023) and loan-level data as at 31 December 2024 provided by the Originator.

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 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.

This credit rating concerns a newly issued 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 https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

In respect of the Class A Notes, the PD and LGD at the AAA (sf) stress scenario of 23.47% and 29.61%, respectively, were stressed assuming a 25% and 50% increase in both the PD and LGD.

Morningstar DBRS concludes the following impact on the Class A Notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to "A" (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: Antonio Laudani, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 10 March 2025

DBRS Ratings GmbH, Sucursal en España
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28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
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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://dbrs.morningstar.com/about/methodologies.

-- Common RMBS Rating Methodology (4 February 2025), https://dbrs.morningstar.com/research/447258

-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196

-- 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

-- 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.