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Related Issuers
Rating Action:

Moody's assigns definitive ratings to two classes of Dutch RMBS notes issued by STRONG 2011-I B.V.

21 Mar 2011

EUR 1,250.0 million of rated debt securities affected

Frankfurt am Main, March 21, 2011 -- Moody's Investors Service has today assigned definitive credit ratings to the following classes of notes issued by STRONG 2011-I B.V.:

....EUR1212.5M A Notes, Definitive Rating Assigned Aaa (sf)

....EUR37.5M B Notes, Definitive Rating Assigned A1 (sf)

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 0.15% of the portfolio at closing and the MILAN Aaa required Credit Enhancement of 3.6% 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.

Key drivers for the MILAN Aaa CE number, which is slightly below other prime Dutch RMBS transactions that closed recently, are (i) the proportion of loans benefitting from an NHG guarantee (100%) as well as Moody's rescission rate assumption for this transaction of 25% which is based on historical pay-out data of claims made under the NHG guarantee, (ii) the substitution criteria that are in place to restrict a credit deterioration during the five year revolving period whereby the portfolio characteristics could change, amongst others, in terms of weighted-average loan-to-foreclosure value (capped at 108%), loan-to-value distribution, seasoning (minimum weighted average seasoning of thirty months in place) and product characteristics such as interest-only (capped at 60%), (iii) the weighted average loan-to-foreclosure-value (LTFV) of 104% and (iv) the portion of interest-only loan parts without an additional repayment vehicle (about 46% of the pool).

The key drivers for the portfolio expected loss are (i) the proportion of loans benefitting from an NHG guarantee (100%), (ii) the performance of the seller's precedent transactions as well as the performance of the seller's book, (iii) benchmarking with comparable transactions backed by loans that all benefit from an NHG guarantee in the Dutch market and the current economic conditions in the Netherlands. Additionally, performance based substitution criteria are in place that are linked to delinquencies (substitution will end if 90+ delinquencies exceed 2.0% of the outstanding balance) and to losses (substitution will end if cumulative losses exceed 0.2% of the initial balance).

Another key characteristic of this transaction is that approximately 18.8% of the portfolio is linked to life insurance policies (life mortgage loan parts), 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 26% of all life insurance-linked products are linked to insurance policies provided by group companies of REAAL Levensverzekeringen N.V., which is not rated by Moody's (the rating of the parent company, SNS Reaal N.V., is Baa1). The substitution criteria allow for up to 40% of the portfolio to be linked to life insurance policies. Given the substituting nature of the pool, Moody's considered the potential increase in life mortgage loan parts and the future evolution of counterparties that provide the life insurance policies since the distribution of life insurance companies could change over time.

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 or acquired by Obvion N.V. (not rated). All loans in the portfolio benefit from an NHG guarantee. The portfolio will be serviced by Obvion N.V. The transaction was arranged by Rabobank.

The non-amortising reserve fund will not be funded at closing but will build up to 0.5% by trapping available excess spread. At closing, the total credit enhancement for the Aaa rated notes is 3.0%. Apart from the reserve fund, the transaction benefits from an excess margin of 50 bps through the swap agreement. The swap counterparty is Obvion N.V. and the swap back-up is Rabobank (Aaa/P-1), who is obliged to assume the obligations of Obvion N.V. under the swap agreement in case of Obvion's bankruptcy.

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 on precedent transactions. Operational risks relating to the servicing arrangement given that the contractual servicer (Obvion N.V.) is not rated by Moody's are a source of uncertainty. This risk is however mitigated by the fact that Obvion N.V. is jointly owned by Rabobank (rated Aaa/P-1) and Stichting Pensioenfonds ABP (not rated), whereby Rabobank holds majority voting rights (70%). In addition, Stater Nederland N.V. was appointed at closing as sub-agent of Obvion N.V. to perform loan administration. Furthermore, a back-up servicer will be appointed if Rabobank loses its controlling stake in Obvion or is downgraded below A3. Moody's has also used an estimate for the rating of Obvion N.V. to assess the operational risk associated with the counterparty in this transaction. Obvion will provide Moody's with its annual financial statements during the life of the 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 according to the report "V-Scores and Parameter Sensitivities in the Major EMEA RMBS Sectors" published in April 2009.

Moody's Parameter Sensitivities: At the time the rating was assigned, the model output indicated that Class A notes would have achieved Aaa if the expected loss was as high as 0.45% assuming Milan Aaa CE increased to 5.8% and all other factors remained the same.

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 transaction 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: The Lognormal Method Applied to ABS Analysis published in September 2000, Moody's Updated MILAN Methodology for 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, 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.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments in this transaction.

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
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 two classes of Dutch RMBS notes issued by STRONG 2011-I B.V.
No Related Data.
© 2019 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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