EUR 700 million of rated debt securities affected
Frankfurt am Main, January 27, 2011 -- Moody's Investors Service has today assigned definitive credit ratings
to the following classes of notes issued by ARENA 2011-I B.V.:
Aaa(sf) to Euro 147,000,000 Senior Class A1 Notes 2011 due
2042
Aaa(sf) to Euro 497,000,000 Senior Class A2 Notes 2011 due
2042
Aa1(sf) to Euro 18,200,000 Mezzanine Class B Notes 2011 due
2042
Aa2(sf) to Euro 16,100,000 Mezzanine Class C Notes 2011 due
2042
A2(sf) to Euro 14,000,000 Junior Class D Notes 2011 due 2042
Baa1(sf) to Euro 7,700,000 Junior Class E Notes 2011 due 2042
RATINGS RATIONALE
The ratings of the notes 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 0.65% of current balance
of the portfolio at closing and the MILAN Aaa required Credit Enhancement
of 8.2% 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 drivers for the MILAN Aaa Credit Enhancement number, which
is above the respective result of recently rated other prime Dutch RMBS
transactions, are (i) the weighted average loan-to-foreclosure-value
(LTFV) of 108.3%, which is higher than for other recently
rated Dutch RMBS transactions, (ii) the relatively high proportion
of interest-only loans (63.2%), (iii) the weighted
average seasoning of 1.7 years, (iv) the above average borrower
concentration (top 20 borrowers represent 2.1% of pool balance),
(v) the limited possibility for the seller to substitute new loans into
the subject structure and (vi) the availability of the NHG-guarantee
for 27.8% of the loans in the pool.
The key drivers for the portfolio expected loss are (i) the performance
of the seller's precedent transactions, (ii) benchmarking with comparable
transactions in the Dutch market and (iii) the current economic conditions
in the Netherlands in combination with historic loss data received from
the seller. Given the historical performance of the Dutch RMBS
market and the originator's precedent transactions (in which pools with
similar risk characteristics have been securitised), Moody's believes
the assumed expected loss is appropriate for this transaction.
Another key characteristic of this transaction is that approximately 13.2%
of the portfolio is currently linked to life insurance policies (life
mortgage loans) or might be linked to such products in the future,
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, whereby 85.5%
of all life insurance-linked products are linked to insurance policies
provided by Delta Lloyd Levensverzekering N.V., which
is not rated by Moody's. Moody's has used a credit estimate for
the Delta Lloyd group and stress tested rating levels for the purpose
of modelling this risk.
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 Amstelhuys N.V. (not rated). The portfolio
will be serviced by Delta Lloyd Bank N.V. while part of
the servicing tasks will be delegated to Stater. The transaction
was arranged by Rabobank.
The non-amortising reserve fund will be funded at 1.5 per
cent of the total class A, B, C, D and E notes outstanding
at closing. The total credit enhancement for the Aaa rated notes
is 9.5 per cent. Apart from the reserve fund, the
transaction benefits from an excess margin of 50 bps provided through
the swap agreement. The swap counterparty is Rabobank International
(Aaa/P-1).
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 historical performance data on precedent transactions is available.
The primary source of uncertainty surrounding our assumptions is the current
macroeconomic environment, in which property values are falling
and unemployment continues to rise. Operational risks relating
to the servicing arrangement given that the contractual servicer (Delta
Lloyd Bank N.V.) is not rated by Moody's are another source
of uncertainty. This risk is mitigated by a credit estimate Moody's
has conducted to assess the credit quality of the Delta Lloyd group.
In addition, Stater Nederland N.V. was appointed at
closing as sub-agent of Delta Lloyd Bank N.V. to
perform loan administration. Furthermore, Stater is subject
to certain conditions committed to step in as servicer in case of default
of Delta Lloyd Bank.
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 and Milan Aaa CE increased from 8.2%
to 13.1% and all other factors were constant, the
model output indicated that Class A1 would have achieved Aaa. If
the portfolio expected loss was increased from 0.65% of
current balance to 1.95% of current balance and Milan Aaa
CE increased from 8.2% to 11.5% and all other
factors were constant, the model output indicated that Class A2
would have achieved Aaa.
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 this rating were Moody's Updated MILAN
Methodology for Rating Dutch RMBS published in September 2009, 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 Updated Approach to NHG Mortgages in Rating Dutch RMBS,
published in March 2009, and Moody's Updated Methodology for Set-Off
in Dutch RMBS published in November 2009.
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 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, and 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.
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.
Frankfurt am Main
Martin Lenhard
Vice President - Senior 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 six classes of Dutch RMBS notes issued by ARENA 2011-I B.V.
