Approximately EUR 6.8 billion of rated debt securities affected
Frankfurt am Main, January 10, 2011 -- Moody's Investors Service assigns definitive ratings to four classes of
Dutch RMBS notes issued by Stichting Orange Lion IV RMBS:
- Aaa(sf) to Euro 1,750.0 million Class A1 Floating
Rate AAA Notes due 2042
- Aaa(sf) to Euro 1,750.0 million Class A2 Floating
Rate AAA Notes due 2042
- Aaa(sf) to Euro 1,550.0 million Class A3 Floating
Rate AAA Notes due 2042
- Aaa(sf) to Euro 1,735.2 million Class A4 Floating
Rate AAA Notes due 2042
Class B is not rated by Moody's
RATINGS RATIONALE
The ratings take 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 0.80% and the MILAN Aaa required
credit enhancement of 12.6% serve 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.
Key drivers for the MILAN Aaa CE number, which is above other prime
Dutch RMBS transactions closed recently, are (i) the limited criteria
to restrict the impact of further advances on the portfolio, including
the fact that further advances are possible for all receivables that were
initially securitized, (ii) the LTV distribution of the portfolio
(about 54% of the pool consist of loans with a LTfV of above 100%)
and (iii) the portion of interest-only loans without an additional
repayment vehicle (about 66% of the pool consists of interest-only
loans without an additional repayment vehicle).
The key drivers for the portfolio expected loss are the performance of
the seller's precedent transactions, the performance on the seller's
book, benchmarking with comparable transactions in the Dutch market
and the current economic conditions in the Netherlands in combination
with historic recovery data of foreclosures received from the seller.
In respect to current economic conditions in the Netherlands, unemployment
is expected to remain around 5.2% in 2011 in the Netherlands
while the benefit system currently provides a strong degree of support
to the unemployed. Additionally, house prices have been falling
since their peak at end-2008 but stabilised recently. Given
the historical performance of the Dutch RMBS market, Moody's believes
the assumed expected loss is appropriate for this transaction.
Another key characteristic of this transaction is that with an exposure
of only 0.9%, the portion of the portfolio that is
linked to life insurance policies (life mortgage loans) and which could
be exposed to set-off risk in case an insurance company goes bankrupt,
is lower compared to other transactions. The seller was not able
to provide loan-by-loan insurance company counterparty data.
An unusual feature of this transaction is that 9.3% of the
portfolio consists of mortgage loans granted to employees within ING Bank
N.V. Moody's has considered the additional potential set-off
risk associated with these loans.
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
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 transaction represents the securitisation of Dutch prime mortgage
loans backed by residential properties located in the Netherlands and
originated by ING Bank N.V. (Aa3). The transaction
was arranged and is serviced by ING Bank N.V. who also provides
the swap. The total credit enhancement for the Aaa rated notes
is 17 per cent. There is no reserve fund in place as well as no
excess spread margin available under the swap structure.
The V-Score for this transaction is Low/Medium, which is
in line with the V-Score assigned for the Dutch RMBS sector,
mainly due to the fact that it is a standard Dutch prime RMBS structure
for which we have over 10 years of historical performance data.
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 according 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 to 2.4%, the model output indicates
that Classes A1, A2, A3 and A4 would still achieve Aaa assuming
that MILAN Aaa Credit Enhancement remains at 12.6% and all
other factors remain equal. If the MILAN Aaa Credit Enhancement
would be stressed by 1.2 times to 15.1%, the
model output for the class A4 notes would be Aa1, assuming an expected
loss of 0.80%.
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 the notes were: The Lognormal
Method Applied to ABS Analysis published in September 2000, Moody's
Updated MILAN Methodology for Rating Dutch RMBS published in March 2009,
Moody's Updated Approach to NHG Mortgages in Rating Dutch RMBS published
in March 2009, Moody's Updated Methodology for Set-Off in
Dutch RMBS published in September 2009 and Cash Flow Analysis in EMEA
RMBS: Testing Structural Features with the MARCO Model published
in January 2006. Other methodologies and factors that may have
been considered in the process of rating this notes 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 report had a neutral impact
on the rating.
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, 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 purpose of assigning
a credit rating.
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.
Additional research, including the new issue 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.
Frankfurt am Main
Olimpia da Silva
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
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 Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns definitive ratings to Dutch RMBS notes issued by Stichting Orange Lion IV RMBS