DBRS Confirms Class A1 and A2 Notes of Belgian Lion NV / SA (Belgian Lion SME II)

DBRS Ratings Limited (DBRS) has today confirmed the AAA (sf) ratings on the Class A1 and A2 notes (the Class A Notes) issued by Belgian Lion NV / SA (Belgian Lion SME II or the Issuer).

The ratings on the Class A Notes address the timely payment of interest and the ultimate payment of principal on or before the Maturity Date in November 2039.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance in terms of delinquencies and defaults.
-- Probability of Default (PD) rate for the collateral pool.
-- The credit enhancement (CE) available to the rated notes to cover the expected losses at the AAA (sf) rating level.

The transaction is a cash flow securitisation collateralised by a portfolio of loans granted to self-employed, small and medium-sized enterprises (SMEs) and corporate borrowers based in Belgium. The loans were originated by ING Belgium SA/NV (ING or the Originator). The transaction was amended on 5 May 2015 (the Amendment) including, among other changes, an extension of the replenishment period, which ended in May 2017, as defined in the terms of the legal documentation, since all the stop replenishment criteria triggers have been meet since closing.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The portfolio’s performance is stable since the last review. As of the May 2017 payment date, the aggregate realised losses in respect of the loans were at 0.22% of the original portfolio balance as of closing and 0.02% of the balance at the restructuring date. Defaulted loans were at 1.78% and 1.30% in terms of the portfolio balance as of closing and restructuring, respectively. As the transaction had been revolving until the May 2017 payment date and the performance is within DBRS’s expectation, DBRS has maintained the PD rate assumptions for the collateral pool at 1.60%.

CREDIT ENHANCEMENT
The CE available to the Class A Notes remains unchanged at 31.0% as the transaction had been revolving until the May payment date.

ING is the main Account Bank provider of the transaction. DBRS’s private rating of ING complies with the Minimum Institution Rating, given the rating assigned to Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

ING is the swap counterparty to the transaction. The DBRS private rating of ING meets the swap counterparty rating requirements, given the rating assigned to the Class A Notes, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating CLOs Backed by Loans to European SMEs.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.

An asset and a cashflow 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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of data and information used for these ratings include the monthly investor reports from ING, and the loan-by-loan data from European DataWarehouse 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 1 August 2016, when DBRS confirmed 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 to the parameters used to determine the rating (the base case):

-- Probability of Default Rates Used: base case PD of 1.60% a 10% increase of the base case and a 20% increase of the base case PD.

-- Recovery Rates Used: base case recovery rates of 25.24% at the AAA (sf) stress level, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at AAA (sf) and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would also lead to a confirmation of the Class A Notes at AAA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class A Notes at AAA (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: Alfonso Candelas, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 14 August 2012

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 CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Legal Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Unified Interest Rate Model for European Securitisations
-- Cash Flow Assumptions for Corporate Credit 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.