DBRS Confirms Bumper NL B.V. Senior Loan Rating Following Amendments

DBRS Limited (DBRS) has today confirmed the rating on the Senior Loan issued by Bumper NL B.V. (Bumper NL, Issuer) following its annual review of the transaction and the analysis of the amendments that were executed on 22 December 2016.

Today’s rating action is based on the following analytical considerations:

-- Assessments on the impact of amendments to the transaction.
-- Portfolio performance in terms of delinquencies and losses prior to the amendments.
-- Portfolio Default Rate, Recovery Rate, and Residual Value Loss assumptions for the collateral pool.
-- The credit enhancement available to the Senior Loan to cover the expected losses at the AAA (sf) rating level.

Bumper NL closed in December 2014 and is a securitisation of a portfolio of lease receivables and residual value cash flows extended to corporate, governmental and small and medium-sized enterprise (SME) customers in the Netherlands granted by LeasePlan Nederland N.V. (LPNL or the Seller). The transaction’s revolving period was due to end on 27 December 2016. Following the transaction amendments on 22 December 2016, both the revolving period and the legal maturity were extended by one year. Other main amendments to the transaction include:

1. The Senior Loan amount will increase to EUR 400,000,000 from EUR 249,750,000 on the January 2017 payment date.
2. The Senior Loan margin reduced to 0.525% from 0.75%
3. The Senior Loan step-up margin remains 0.00% until the December 2017 payment date, after which it will increase to 0.875% instead of 0.65%.
4. The Required Liquidity Reserve Amount will increase to EUR 2,640,000 on the January 2017 payment date. On subsequent payment dates, the target amount will be the higher of EUR 2,000,000 and 0.66% of the Senior Loan Amount from. Prior to the amendments, this was the higher of EUR 1,000,000 and 0.80% of the Senior Loan Amount.
5. The Required Set-Off Reserve Amount reduced to EUR 1,100,000 from EUR 1,680,000.

The Required Subordination Amount remains at 25% of the Aggregate Discounted Balance of the Portfolio. As a result, the subordinated loan and the receivable portfolio balances will both increase to satisfy the subordination requirement. The credit enhancement available to the Senior Loan, consequently, remains at 25.0% following the amendments.

As of 31 October 2016 the Portfolio was performing as DBRS expected. Receivables more than 90 days delinquent as a percentage of the outstanding receivables remained low at 0.05%. Cumulative default as a percentage of the original securitised receivables plus total additional purchases increased slightly to 0.45%. DBRS has maintained its base case Portfolio Default Rate and Recovery Rate assumptions at 1.58% and 54.57%, respectively, which leads to a credit net loss assumption of 0.72%. In addition, DBRS analysed the sales data for 2016 up to October and noted that the transaction has experienced only limited Residual Value losses on a small portion of the sold receivables. DBRS has also maintained its Residual Value loss assumption at the AAA (sf) rating level at 45.39%.

DBRS conducted a cash flow analysis based on the maintained Portfolio assumptions and the updated model reflecting the amendments to the transaction. Following the cash flow analysis, DBRS concluded that there is no negative impact to the Senior Loan’s rating as a result of the amendments.

ABN AMRO Bank N.V. (ABN) acts as the Account Bank and the Swap Counterparty for the transaction. ABN’s reference rating of AA (low), being one notch below ABN’s DBRS Long Term Critical Obligations Rating of AA, meets the Minimum Institution Rating criteria, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, and meets the minimum required rating as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the AAA (sf) rating assigned to the Senior Loan.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: “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. Due to the inclusion of a revolving period in the transaction, the analysis is based on the worst-case replenishment criteria set forth in the transaction legal documents.

DBRS has reviewed the amended transaction documents including Master Definitions And Common Terms Agreement, Master Hire Purchase Agreement, Senior Loan Agreement, Reserves Funding Agreement, Interest Rate Swap Confirmation, Administration Agreement, Account Agreement, Servicing Agreement, Maintenance Coordination Agreement, Subordinated Loan Agreement, Realisation Agency Agreement, Intercreditor Agreement, ISDA Schedule to the Master Agreement, and ISDA Master Agreement.

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 monthly investor reports, the amendment documents, the updated run-off schedule, and the loan-by-loan data provided by LPNL.

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 to be 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 9 December 2015, when DBRS confirmed the Senior Loan rating at AAA (sf).

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

To assess the impact of the changing transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating:

-- DBRS expected a base case Portfolio Default Rate, Loss Give Default, and Residual Value Loss for the pool based on a review of the current assets and the transaction’s eligibility criteria. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.

-- The base case Portfolio Default Rate, Loss Give Default, and Residual Value Loss of the receivable pool are 1.58%, 45.43% and 24.88%, respectively. At the AAA (sf) level, the Portfolio Default Rate and Residual Value Loss are 9.48% and 45.39%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected if the Portfolio Default Rate, Loss Give Default, and Residual Value Loss increase by a certain percentage over the base case assumption. For example, if the Residual Value Loss increases by 50%, the rating on the Senior Loan would be expected to be at AA (low) (sf), assuming no change in the Portfolio Default Rate, and Loss Given Default. If the Portfolio Default Rate and Loss Given Default increase by 50%, the rating on the Senior Loan would be expected to be at AAA (sf), assuming no change in the Residual Value Loss. Furthermore, if the Portfolio Default Rate, Loss Given Default, and Residual Value Loss increase by 50%, the rating on the Senior Loan would be expected to be at A (high) (sf).

Senior Loan Sensitivity:
-- 25% increase in Residual Value Loss, expected rating of AAA (sf)
-- 50% increase in Residual Value Loss, expected rating of AA (low) (sf)
-- 25% increase in Portfolio Default Rate, and Loss Given Default, expected rating of AAA (sf)
-- 50% increase in Portfolio Default Rate, and Loss Given Default, expected rating of AAA (sf)
-- 25% increase in Portfolio Default Rate, and Loss Given Default and 25% increase in Residual Value Loss, expected rating of AA (high) (sf)
-- 25% increase in Portfolio Default Rate, and Loss Given Default and 50% increase in Residual Value Loss, expected rating of A (high) (sf)
-- 50% increase in Portfolio Default Rate, and Loss Given Default and 25% increase in Residual Value Loss, expected rating of AA (high) (sf)
-- 50% increase in Portfolio Default Rate, and Loss Given Default and 50% increase in Residual Value Loss, expected rating of A (high) (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (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.

Lead Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Senior Vice President
Initial Rating Date: 17 December 2014

DBRS Ratings Limited
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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

-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Unified Interest Rate Model for European Securitisations
-- 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