EUR [1,500] million of rated debt securities affected
London, 23 March 2011 -- Moody's Investors Service has today assigned provisional credit ratings
to the following classes of notes to be issued by SAECURE 10 B.V.:
Euro [350,000,000] Senior Class A1 Mortgage-Backed Notes 2011 due 20[94], assigned (P)Aaa (sf)
Euro [1,050,000,000] Senior Class A2 Mortgage-Backed Notes 2011 due 20[94], assigned (P)Aaa (sf)
Euro [47,500,000] Mezzanine Class B Mortgage-Backed Notes 2011 due 20[94], assigned (P)Aa2 (sf)
Euro [22,500,000] Mezzanine Class C Mortgage-Backed Notes 2011 due 20[94], assigned (P)A1 (sf)
Euro [15,000,000] Junior Class D Mortgage-Backed Notes 2011 due 20[94], assigned (P)A3 (sf)
Euro [15,000,000] Junior Class E Mortgage-Backed Notes 2011 due 20[94], assigned (P)Baa2 (sf)
Class F is not rated by Moody's
RATINGS RATIONALE
The transaction represents a securitisation of Dutch prime mortgage loans
backed by residential properties located in the Netherlands and originated
by AEGON Levensverzekering N.V. ("AEGON Leven"; not
rated). The portfolio will be serviced by AEGON Leven.
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.
The expected portfolio loss of 0.75% and the MILAN Aaa required
Credit Enhancement of 7.6% served as input parameters for
Moody's cash flow model. This model 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 slightly higher than other prime Dutch RMBS transactions closed in
2010 and 2011, are (i) the weighted average loan-to-foreclosure-value
(LTFV) of 88.1%, which is slightly lower than other
prime Dutch RMBS transactions, (ii) the proportion of interest-only
loan parts (52.6%) and (iii) the weighted average seasoning
of 4.4 years.
Furthermore, the pool contains a significant proportion of loans
with long maturity dates. 19.5% of the pool has a
maturity date after 31 December 2070. Combined with the borrowers'
age Moody's assessed that 53.1% of the pool comprises
loan parts whereby the borrowers would be older than 80 years at the maturity
of the loan and 14.5% would be older than 100 at maturity
of the loan. These long maturities distinguish this pool from other
prime pools in the Dutch market. We applied an additional adjustment
in the MILAN model for these loan parts, because we view these loans
to be riskier than the benchmark loan. We are concerned about higher
default frequencies, because given the current life expectancy in
the Netherlands the borrowers die before the maturity of the loan.
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 recovery data on foreclosures
received from the seller. Previous transactions of the originator
generally perform worse than the Dutch index and as a result Moody's
updated its expected loss assumption for SAECURE 4 and SAECURE 5 transactions
to 0.70% of the original portfolio balance in December 2010.
Approximately 23.1% 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,
whereby 100% of all life insurance-linked products are linked
to insurance policies provided by the seller, AEGON Leven.
AEGON Leven is not rated by Moody's, however it is a subsidiary
of AEGON N.V. (A3). Moody's has considered the rating
of the ultimate parent company, AEGON N.V.,
and stress tested rating levels to measure the impact on the ratings of
the notes.
The transaction benefits from a non-amortizing reserve fund that
will be funded at 1.0% of the outstanding portfolio at closing.
The reserve fund is replenished before interest payment on the unrated
class F notes. The transaction also benefits from an amortising
liquidity facility of 1.5% of the outstanding principal
amount of the notes (including class F notes) with a floor of 1.0%
of outstanding principal amount of notes (including class F notes) as
of closing. The liquidity facility will be available to cover any
interest shortfalls on the notes (excluding class F notes). For
class B to E notes the liquidity facility will be only available if there
is no PDL on each respective class.
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. Non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
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.
The primary source of uncertainty surrounding our assumptions is the proportion
of loans with long maturities and high expected age of borrowers at the
maturities of these loans. There is little data available on how
these loans would perform when borrowers reach old age. There is
also little data available on foreclosures and losses in cases where the
borrower has deceased. Operational risks relating to the servicing
arrangement, are another source of uncertainty given that the contractual
servicer (AEGON Leven) is not rated by Moody's and that there are no back-up
arrangements for the servicing and cash management. This risk is
mitigated to a certain extent by the fact that AEGON Leven's ultimate
parent company AEGON N.V. is rated A3 by Moody's.
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 from 0.75% to 2.25 % (a stress
of 3 times) and if the MILAN Aaa Credit Enhancement was increased from
7.6% to 12.2% (a stress of 1.6 times),
the model output indicates that the class A1 notes would still achieve
Aaa and the class A2 would achieve Aa3.
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 Methodology for Set-Off
in Dutch RMBS published in November 2009 and Global Structured Finance
Operational Risk Guidelines: Moody's Approach to Analyzing Performance
Disruption Risk published in March 2011.
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.
London
Michal Hajek
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
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 Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns provisional ratings to six classes of Dutch RMBS notes issued by SAECURE 10 B.V.
