€ 646.75 million of rated debt securities affected
London, 17 February 2011 -- Moody's Investors Service has assigned definitive long-term ratings
to one class of notes of Hypolan NV/SA
Euro 646.75M A Notes, Assigned Aa1 (sf)
RATINGS RATIONALE
The ratings of the notes take into account the credit quality of the underlying
mortgage and mandate loan pool, from which Moody's determined the
MILAN Aaa Credit Enhancement and the portfolio expected loss, as
well as the transaction structure and any legal considerations as assessed
in Moody's cash flow analysis.
Hypolan NV/SA is an existing Belgian RMBS transaction that closed on 20
April 2009 and it is the first residential mortgage-backed notes
transaction by Caisse de Dépôt et de Crédit Agricole
SCRL ("Agricaisse") and Deposito en Kredietkas van de Landbouw
CVBA ("Lanbokas").
The portfolio consists of Belgian prime residential home loans backed
by first economic lien mortgages or mandates originated and serviced by
Crédit Agricole SA / Landbouwkrediet NV ("LBK/CA").
The transaction is arranged by Dexia Bank Belgium which also provides
the swap . The swap mitigates the interest rate risk relating to
the fixed rate loans which represent 76.6% of the pool and
to the basis risk related to the floating rate loans (after they reset
from fixed rate) that represent 23.4%. The swap also
guarantees a 35 bps excess spread.
At closing the transaction issued Euro 646.75 million of class
A notes and Euro 53.25 million of Class B notes, together
the senior notes. A reserve fund of 1% of the senior notes
size at closing was funded from the issuance of Class C notes.
The reserve fund was fully funded as of the reporting date of November
2010 and amortises to the higher of (i) 1.9% of the current
senior note balance and (ii) 0.25% of original senior note
balance, if various portfolio performance triggers are not breached.
The claw-back risk that arises from potential repurchases is mitigated
by the requirement for the issuer that the buyers need provide a solvency
letter as a condition precedent to the purchase (except in the case of
mandatory purchases due to breach of eligibility criteria).
The expected portfolio loss of 0.94% of original balance
of the portfolio at closing (1.1% of balance as of rating
date) and the MILAN Aaa required Credit Enhancement of 6.18%
of original balance (7.2% of balance as of rating date)
served as input parameters for our cash flow model, which is based
on a probabilistic lognormal distribution as described in the report "Cash
Flow Analysis in EMEA RMBS: Testing Structural Features with the
MARCO Model", published in January 2006. The key drivers
for the MILAN Aaa Credit Enhancement number, which is in line with
other prime Belgian RMBS transactions, are (i) the weighted average
loan-to-value (LTV) of 68.6% and (ii) the
substantial seasoning of more than 4 years.
The key drivers for the portfolio expected loss are (i) the performance
of the pool currently securitized (ii) benchmarking with comparable transactions
in the Belgian market and (iii) the current economic conditions in the
Belgium in combination with historic arrears and recovery data provided
by the seller.
The exposure of the transaction to liquidity risk in case of servicing
disruption together with the fact that the originator does not have a
monitored rating by Moody's are the main drivers for the Class A
note not achieving the highest rating.
The rating addresses the expected loss posed to investors by the legal
final maturity of the notes. In Moody's opinion, the structure
allows for timely payment of interest and principal with respect of the
Class A notes by the legal final maturity. Moody's ratings only
address the credit risk associated with the transaction. Other
non-credit risks have not been addressed, but may have a
significant effect on yield to investors.
The V Score for this transaction is Medium, which is in line with
the score assigned for the Belgian RMBS sector. The only component
of the V score that differs from the Belgian score is 4.1 "Experience
of, Arrangements Among and Oversight of Transaction Parties".
This component has been assessed as L/M vs. L for the market score
based on the limited experience of the originator in securitising mortgage
loans, although the rest of parties are experienced. The
V-Score has been assigned accordingly to the report "V-Scores
and Parameter Sensitivities in the Major EMEA RMBS Sectors" published
in April 2009. V Scores are a relative assessment of the quality
of available credit information and of the degree of dependence on various
assumptions used in determining the rating. High variability in
key assumptions could expose a rating to more likelihood of rating changes.
The principal methodologies used in this rating were The Lognormal Method
Applied to ABS Analysis published in September 2000, Moody's Updated
MILAN Methodology for Rating Belgian RMBS published in September 2006
and Cash Flow Analysis in EMEA RMBS: Testing Features with the MARCO
Model (Moody's Analyser of Residential Cash Flows) published in January
2006.
Moody's Investors Service received and took into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction and the due diligence report had a neutral impact
on the rating.
Moody's Parameter Sensitivities: If the portfolio expected
loss was increased to 3.3%, the model output indicates
that Class A would achieve Aa1 assuming that MILAN Aaa Credit Enhancement
remains at 7.2% and all other factors remain equal.
If the MILAN Aaa Credit Enhancement would be stressed by 1.6 times
to 11.5%, the model output for the class A notes would
be Aa2, assuming an expected loss of up to 1.1%.
Moody's Parameter Sensitivities provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's structured
finance security may vary if certain input parameters used in the initial
rating process differed. The analysis assumes that the deal has
not aged and is not intended to measure how the rating of the security
might migrate over time, but rather how the initial rating of the
security might have differed if key rating input parameters were varied.
Parameter Sensitivities for the typical EMEA RMBS transaction are calculated
by stressing key variable inputs in Moody's primary rating model.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information and confidential
and proprietary Moody's Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
The reports mentioned above are available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Additional research, including the pre-sale report for this
transaction and reports for prior transactions, are available at
www.moodys.com. In addition Moody's publishes a weekly
summary of structured finance credit, ratings and methodologies,
available to all registered of our website, at www.moodys.com/SFQuickCheck.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
London
Frank Julia-Sala
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Annabel Schaafsma
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
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Moody's assigns definitive ratings to Belgian RMBS Notes issued by Hypolan NV/SA
