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Rating Action:

Moody's assigns definitive ratings to Dutch RMBS issued by Phedina Hypotheken 2010 B.V. (PHEDINA 2010)

21 Oct 2010

EUR 5,000 Million of Debt Securities Affected

Johannesburg, October 21, 2010 -- Moody's Investors Service has today assigned definitive credit ratings to the following classes of notes issued by Phedina Hypotheken 2010 B.V. (PHEDINA 2010):

Aaa (sf) to the EUR 4,600,000,000 Senior Class A Mortgage Backed Notes 2010 due 2048

Aa3 (sf) to the EUR 400,000,000 Junior Class B Mortgage Backed Notes 2010 due 2048

The transaction represents the first securitisation of Dutch residential mortgage loans originated by BNP Paribas Personal Finance B.V. ("BNP Paribas PF") (not rated), wholly owned by BNP Paribas Personal Finance S.A. which is wholly owned by BNP Paribas (Aa2/P-1)). The assets supporting the notes, which amount to EUR 5.0 billion, are prime mortgage loans (include 33% of NHG guaranteed mortgage loans) secured on residential properties located in the Netherlands. BNP Paribas PF, as contractual servicer, has sub-delegated its servicing function to Stater (loan administration) and Novalink (early arrears and loss mitigation).

RATINGS RATIONALE

The ratings of the notes takes into account the credit quality of the underlying mortgage 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.

The expected portfolio loss of 0.65% and the MILAN Aaa required Credit Enhancement of 9.30% served as input parameters for Moody's cash flow model, which is based on a probabilistic lognormal distribution as described in the report "The Lognormal Method Applied to ABS Analysis", published in September 2000.

The key driver for the relatively high MILAN Aaa Credit Enhancement number is the fact that the structure is revolving for 5 years with portfolio limits in place, notably (i) the weighted-average LTfV of 107% (currently 106%); (ii) a 75% limit on interest only loans (currently 59.3%) and (iii) the minimum weighted-average seasoning limit of 2 years (currently 2.6 years) . This is partially offset by the minimum proportion of NHG loans of 25% (currently 32.3%).

The key drivers for the portfolio expected loss are (i) the historical default and loss performance on the BNP Paribas PF book; (ii) the 25% minimum proportion of NHG loans in the pool; and (iii) benchmarking with comparable transactions in the Dutch RMBS market. Given the historical performance of the Dutch RMBS market and the originator's book, Moody's believes the assumed expected loss is appropriate for this transaction. The EL is in line with other comparable Dutch RMBS transactions. The current level of arrears of the portfolio of 1.1% of the current balance of the portfolio has been taken into account in the portfolio expected loss assumption.

Another key characteristic of this transaction is that approximately 28% of the portfolio is linked to life insurance policies (life mortgage loans), which are exposed to set-off risk in case an insurance company goes bankrupt. The seller has provided loan-by-loan insurance company counterparty data which shows that close to 74% of the counterparty exposure is linked to policies provided by REAAL Levensverzekeringen N.V. (part of SNS REAAL N.V rated Baa1) and Cardif Assurance Vie (ultimate parent company BNP Paribas rated Aa2/P-1). To allow for some variance to the counterparty exposures linked to life insurance policies during the 5 year revolving period Moody's has stressed the exposure to the above two counterparty exposure to 38% of the portfolio linked to life insurance policies and reduced Cardif Assurance Vie proxy rating from Aa2 (BNP Paribas SA rating) to A3.

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 to the 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, indicating a higher rating volatility compared to the V-Score assigned for the Dutch prime RMBS sector of Low/Medium, mainly due to the fact that the swap mechanism is non-standard for Dutch RMBS transactions and the swap counterparty (BNP Paribas PF) is unrated, however there is a back-up swap counterparty in place. Under a novation and amendment agreement the swap will be automatically novated to the back-up swap counterparty, following credit events relating to the swap counterparty. Due to the automatic novation Moody's had to consider additional risks relating to the swap agreement, which makes this transaction more complex than the standard Dutch RMBS transaction.

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 V-Score has been assigned accordingly to the report "V-Scores and Parameter Sensitivities in the Major EMEA RMBS Sectors" published in April 2009.

Moody's Parameter Sensitivities: If the portfolio expected loss was increased from 0.65% of current balance to 1.95% of current balance, the model output indicates that the Class A/B notes would have been Aaa/A2 assuming that MILAN Aaa Credit Enhancement remains at 9.3% and all other factors remain equal. If the portfolio MILAN Aaa Credit Enhancement was increased from 9.3% to 14.9%, the model output indicates that the Class A/B notes would have been Aa1/A1 assuming that the expected loss remains at 0.65% and all other factors remain equal.

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.

The principal methodologies used in rating PHEDINA 2010 were Moody's Updated MILAN Methodology for Rating Dutch RMBS published in September 2009, Moody's Updated Approach to NHG Mortgages in Rating Dutch RMBS published in March 2009, Cash Flow Analysis in EMEA RMBS: Testing Features with the MARCO Model (Moody's Analyser of Residential Cash Flows) published in January 2006, and Moody's Updated Methodology for Set-Off in Dutch RMBS published in November 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

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 reports had a neutral impact on the rating.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service 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 users of our website, at www.moodys.com/SFQuickCheck

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.

Johannesburg
Dion Bate
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Christophe de Noaillat
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 South Africa (Pty) Ltd.
The Forum
2 Maude Street
2196 Sandton
Johannesburg
South Africa

Moody's assigns definitive ratings to Dutch RMBS issued by Phedina Hypotheken 2010 B.V. (PHEDINA 2010)
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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