DBRS Confirms Ratings of Record Lion NV/SA Compartment RMBS I

DBRS Ratings Limited (DBRS) has today confirmed the ratings of Record Lion NV/SA Compartment RMBS I (the Issuer) as follows:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)

Record Lion RMBS I is a securitisation of first-ranking Belgian residential mortgages (portfolio of EUR 2.7 billion at closing) originated and serviced by Record Bank SA (fully owned by ING Belgium). The structure included a revolving period that ended in February 2015.

Confirmation of the ratings for the Class A1 and A2 Notes is based upon the following analytical consideration, as described more fully below:
-- Portfolio performance, in terms of defaults and level of delinquencies, as of the November 2014 payment date.
-- Current available credit enhancement to Class A1 and Class A2 Notes to cover the Expected Losses at the AAA (sf) rating level.

The current 90+ delinquency ratio as a percentage of the performing balance of the portfolio was 0.94%, while the gross cumulative default ratio was 2.23% of the aggregated collateral balance. Recovery rate is high with 91.68% of the net cumulative defaults.

The credit enhancement to the Class A1 and Class A2 Notes is equal to the original amount of 27.0%. Credit enhancement consists of subordination of the Class B Notes (EUR 645.5 million) and a fully funded, non-amortising Cash Reserve Fund (EUR 80.67 million). Under the Interests Priority of Payments, the Reserve Fund is senior to the Class B interest payments. Any excess spread will be used to replenish the Reserve Fund instead of paying Class B interest.

The Issuer benefits of two separate Principal Deficiency Ledgers (PDL) for each the Class A and B Notes. Class A1 and Class A2 share a single PDL. The PDL mechanism allows for excess spread to be used to cover losses underlying loans. Class A1 and A2 receive interest on a pari passu basis. Although Class A1 and A2 share a PDL, the principal payments on the notes are sequential and there are no conditions or triggers for switching to pro rata payment.

The transaction has a 364 day Liquidity Facility that can be renewed at ING Belgium’s option every year. It will be used for meeting any shortfalls in payment to senior fees and interest on Class A1 and A2 Notes. The Liquidity Facility is sized at 1.75% of the aggregate principal amount of underlying loans.

ING Belgium SA/NV holds the Treasury Account for the transaction. The DBRS private ratings of ING Belgium SA/NV complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in euros unless otherwise noted.

The applicable methodology is Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include periodic investor reports provided by ATC Financial Services and data from the European DataWarehouse. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 11 April 2014, when DBRS confirmed the rating of AAA (sf) to Class A1 and Class A2 Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current receivables. 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 mortgages for the Issuer are 2.78% and 21.20%, respectively. The corresponding levels at the AAA (sf) rating level are 26.23% and 50.21%.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A1 Notes would be expected to remain to AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A1 Notes would be expected to remain at AAA (sf).

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Kali Sirugudi
Initial Rating Date: 17 November 2011
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 11 April 2014

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
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United Kingdom

Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model for European Securitisations