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Rating Action:

Moody's affirms all notes of Domi 2020-1 B.V. and Domi 2020-2 B.V. following a reassessment of the reserve fund structures

11 Jun 2021

Paris, June 11, 2021 -- Moody's Investors Service ("Moody's") has today affirmed the ratings of 14 notes in 2 Dutch RMBS buy-to-let transactions Domi 2020-1 B.V. and Domi 2020-2 B.V. following the correction of an error.

Issuer: Domi 2020-1 B.V.

....EUR 281.68M Class A Notes, Affirmed Aaa (sf); previously on Mar 13, 2020 Definitive Rating Assigned Aaa (sf)

....EUR 15.91M Class B Notes, Affirmed Aa2 (sf); previously on Mar 13, 2020 Definitive Rating Assigned Aa2 (sf)

....EUR 7.96M Class C Notes, Affirmed A2 (sf); previously on Mar 13, 2020 Definitive Rating Assigned A2 (sf)

....EUR 4.78M Class D Notes, Affirmed Baa2 (sf); previously on Mar 13, 2020 Definitive Rating Assigned Baa2 (sf)

....EUR 4.77M Class E Notes, Affirmed Ba1 (sf); previously on Mar 13, 2020 Definitive Rating Assigned Ba1 (sf)

....EUR 3.18M Class F Notes, Affirmed Caa3 (sf); previously on Mar 13, 2020 Definitive Rating Assigned Caa3 (sf)

....EUR 14.32M Class X1 Notes, Affirmed Caa2 (sf); previously on Mar 13, 2020 Definitive Rating Assigned Caa2 (sf)

....EUR 4.78M Class X2 Notes, Affirmed Ca (sf); previously on Mar 13, 2020 Definitive Rating Assigned Ca (sf)

Issuer: Domi 2020-2 B.V.

....EUR 227.62M Class A Notes, Affirmed Aaa (sf); previously on Oct 23, 2020 Definitive Rating Assigned Aaa (sf)

....EUR 13.58M Class B Notes, Affirmed Aa2 (sf); previously on Oct 23, 2020 Definitive Rating Assigned Aa2 (sf)

....EUR 6.47M Class C Notes, Affirmed A1 (sf); previously on Oct 23, 2020 Definitive Rating Assigned A1 (sf)

....EUR 3.88M Class D Notes, Affirmed Baa2 (sf); previously on Oct 23, 2020 Definitive Rating Assigned Baa2 (sf)

....EUR 3.88M Class E Notes, Affirmed Ba1 (sf); previously on Oct 23, 2020 Definitive Rating Assigned Ba1 (sf)

....EUR 11.64M Class X1 Notes, Affirmed Caa2 (sf); previously on Oct 23, 2020 Assigned Caa2 (sf)

Today's action reflects the correction of an error. In prior rating actions for these transactions, Moody's mistakenly assumed that the reserve fund amortises after the first optional redemption date in line with the outstanding balance of the Class A Notes. However, the transaction documents provide that after the first optional redemption date (5 years after transaction closing), the reserve fund target level is set to zero and the reserve fund is released into the principal waterfall. This leaves the transactions, and the Class A Notes in particular, without any source of external liquidity in case of servicer disruption after the first optional redemption date.

In both transactions the reserve fund release amounts after the first optional redemption date are fully available to turbo amortise the most senior outstanding notes, which is overall positive for all notes; however, as a consequence the reserve fund cannot provide liquidity to the structure after the first optional redemption date in order to mitigate servicer financial disruption risk.

Moody's has reassessed the ratings of these transactions in light of this provision. In doing so, Moody's has considered a number of mitigating factors. First, while Domivest B.V. (NR) with its current size and set-up acting as master servicer of the securitised portfolios would not have the capacity to service the portfolios on its own, the day-to-day servicing of the portfolios is outsourced to Stater Nederland B.V. ("Stater", NR) as delegate servicer and HypoCasso B.V. (NR, 100% owned by Stater) as delegate special servicer. Stater and HypoCasso B.V. are obliged to continue servicing the portfolio after a master servicer termination event. Furthermore, the parents of Stater, Infosys Limited (Baa1) and ABN AMRO Bank N.V. (A1, P-1, Aa3(cr), P-1(cr)), are highly rated. Second, although the Dutch buy-to-let sector is still a small and niche market, it has developed over the last two years and there is a greater number of buy-to-let originators and servicers active today than in years past. Recent Dutch buy-to-let securitisations from three different originators are also a sign of a more dynamic market. Finally, other mitigants include the issuer administrator acting as a back-up servicer facilitator, who will assist the issuer in appointing a back-up servicer on a best effort basis upon termination of the servicing agreement; the availability of a collection foundation account structure; and principal collections being available to pay interest on the most senior notes.

Given the above, servicer financial disruption risks are deemed sufficiently low to maintain the existing ratings without further mitigants. Moody's has therefore affirmed these ratings. Nonetheless, liquidity remains important to fully de-link the ratings from changes in the counterparty risk. In Domi 2020-1 B.V. and Domi 2020-2 B.V. the high ratings of the senior notes are highly dependent on the credit strength of Stater and its parents five years into the transaction after the first optional redemption date. This linkage is typically not present in other transaction structures that provide liquidity over the lifetime of the senior notes.

CURRENT ECONOMIC UNCERTAINTY

The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of consumer assets from a gradual and unbalanced recovery in Dutch economic activity.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in December 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1248130. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Please see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further information on Moody's analysis at the initial rating assignment and the on-going surveillance in RMBS.

Factors that would lead to an upgrade or downgrade of the ratings:

Factors that may cause an upgrade of the ratings of the notes include significantly better than expected performance of the pool together with an increase in credit enhancement of the rated notes.

Factors that would lead to a downgrade of the ratings include: (i) increased counterparty risk leading to: (a) potential operational risk of servicing or cash management interruptions; and (b) the risk of increased swap linkage due to a downgrade of the swap counterparty ratings; and (ii) economic conditions being worse than forecast resulting in higher arrears and losses.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Bongani Dlamini
Asst Vice President - Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Michelangelo Margaria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Armin Krapf
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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