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.
