DBRS Confirms Wendelstein 2015-1 UG (haftungsbeschränkt)

DBRS Ratings Limited (DBRS) has today confirmed its AA (sf) rating on the Class A Notes issued by Wendelstein 2015-1 UG (haftungsbeschränkt) (Wendelstein 2015-1).

Today’s rating action is based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults.
-- Portfolio probability of default (PD) rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

Wendelstein 2015-1, closed in July 2015, is a securitisation of a portfolio of German residential mortgage loans originated and serviced by Deutsche Bank Privat und Geschäftskunden Aktiengesellschaft (DB Private), a subsidiary of Deutsche Bank AG (rated A (high)/R-1 by DBRS). The transaction is currently in the Replenishment Period, which ends on 17 July 2020 or when the Replenishment Termination Event occurs.

The portfolio is performing within DBRS’s expectations. As of 31 May 2016, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance were at 0.06% and loans more than 30 days delinquent were at 0.07%. There is currently no realized loss on the portfolio. The good portfolio performance is partly attributed to the active loan repurchases by DB Private. As the transaction is still revolving, DBRS has maintained the base-case PD and LGD assumptions for the collateral pool at 3.48% and 28.22%, respectively.

The CE available to the Class A Notes remains unchanged at 16.0% as the transaction is revolving. The CE is provided through the subordinated Class B Notes.

DB Private is the counterparty on all major roles in the transaction including Servicer, Collection Account Bank, Account Bank and Swap Counterparty. The Critical Obligations Rating of Deutsche Bank AG, DB Private’s parent company, meets the Minimum Institution Rating criteria as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and meets the swap counterparty rating requirement as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the rating assigned to the Class A Notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology.

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. However, due to the inclusion of a revolving period in the transaction and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

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

The sources of information used for this rating include the investor reports provided by Deutsche Bank Treasury – Deal/Deckungsmanagement and the loan by loan data from European Data Warehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

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.

This is the first rating action since the Initial Rating Date.

The last rating action on this transaction took place on 17 July 2015, when DBRS assigned its AA (sf) rating to the Class A Notes. The lead responsibilities for this transaction have been transferred to Kevin Ma.

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 base case PD and LGD for the remaining collateral 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 assumptions for the Wendelstein 2015-1 collateral pool are 3.48% and 28.22%, respectively. At the AA (sf) rating level, the corresponding PD is 19.76% and the LGD is 38.17%.

-- 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 on the Class A Notes would be expected to be at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to be at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on Class A would be expected to be at A (low) (sf).

Class A Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration (ESMA) 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 July 2015
Initial Rating Committee Chair: Diana Turner

Lead Surveillance Analyst: Kevin Ma
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
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London EC3M 3BY
United Kingdom
Registered in England and Wales: No. 7139960

The rating methodologies 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
-- Operational Risk Assessment for European Structured Finance Originators
-- Unified Interest Rate Model for European Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Derivative Criteria for European Structured Finance Transactions

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375