DBRS Confirms Rating on Essence V B.V.

DBRS Ratings Limited (DBRS) has today confirmed its rating of AAA (sf) on the Class A Notes issued by Essence V B.V. (the Issuer).

The confirmation of the rating is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults, as of January 2017.
-- Default rate, loss given default and expected losses are within DBRS’s expectations.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Essence V B.V. is a securitisation of first-ranking, or first-ranking and sequentially lower-ranking, Dutch prime residential mortgages, originated or acquired by NIBC Bank N.V. (NIBC) and its subsidiaries. The portfolio is serviced by NIBC, with Stater Nederland B.V (Stater), Quion Hypotheekbemiddeling B.V and Quion Services B.V. (together Quion), assuming the role of sub-servicers. The transaction is currently in its five-year revolving period, which is scheduled to end in December 2019.

As of January 2017, two-to-three month arrears were at 0.15%, up slightly from 0.14% a year ago. The 90+ delinquency ratio is at 0.25%, up from 0.16% a year ago. The current gross cumulative default ratio is 0.17%.

As of January 2017, credit enhancement to the Class A Notes was 7.80%, and has remained stable since closing due to the revolving period. Credit enhancement to the Class A Notes consists of subordination of the Class B Notes and the Reserve Fund.

The Reserve Fund is available to cover senior fees and any interest and principal shortfall (via the Principal Deficiency Ledger) on the Class A Notes. The Reserve Fund is currently at its target level of EUR 5,391,750 and is permitted to amortise under certain conditions. The structure also includes a Liquidity Reserve which covers senior fees and Class A Notes interest. The Liquidity Reserve is currently at its target level of EUR 2,998,800 and is also permitted to amortise.

The Issuer Transaction Account is held with Société Générale S.A., Amsterdam Branch, privately rated by DBRS. The DBRS private rating complies with the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

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. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.
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” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of data and information used for this rating include investor reports provided by NIBC and data from The European Data Warehouse GmbH.

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

At the time of the initial rating, DBRS was not supplied with third party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 9 February 2016 when DBRS confirmed the rating on the Class A Notes at AAA (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 with 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 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 of the current pool are 3.54% and 18.78%, respectively.
-- 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 the Class A Notes would be expected to fall to AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to A (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (high) (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 AA (low) (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 (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 Surveillance Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 27 November 2014

DBRS Ratings Limited
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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
-- Operational Risk Assessment for European Structured Finance Originators
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model for European Securitisations

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.