London, 03 October 2013 -- Moody's Investors Service has today downgraded fifteen mezzanine and junior
classes of notes issued in five Dutch residential mortgage-backed
securities (RMBS) transactions of the HERMES series. Also,
Moody's has confirmed the rating of Class C in HOLLAND MORTGAGE
BACKED SERIES (HERMES) VIII B.V. Today's downgrade
actions were prompted by worse-than-expected collateral
performance.
Today's rating action concludes the review for downgrade initiated by
Moody's on 23 April 2013.
For a detailed list of affected ratings, see towards the end of
the press release, before regulatory disclosures.
RATINGS RATIONALE
Today's downgrade actions take into consideration revision of key collateral
assumptions due to the worse-than-expected performance and
declining house prices in the Netherlands. Today's confirmation
of the rating on Class C in HERMES VIII reflects sufficient credit enhancement
to withstand the increase in key collateral assumptions and counterparty
exposure.
The performance of the HERMES series has been deteriorating. 60+
day delinquencies have been trending above Moody's Dutch RMBS Performance
Index levels by approximately 2% in each reviewed transaction with
the exception of HERMES XV. Cumulative losses reached approximately
0.1% of the original portfolio balance in HERMES XV and
between 0.5% and 0.75% of the original portfolio
balance in the remaining reviewed transactions.
After considering the current amounts of realized losses and completing
a delinquency roll rate analysis for the portfolio, Moody's increased
its lifetime expected loss assumptions for HERMES VIII through XII to
levels between 1.3% and 1.6% of the original
portfolio balance. The lifetime expected loss assumption in HERMES
XV remains unchanged at 0.75% of the original portfolio
balance. A list of the transactions with the updated assumptions
is available at the following link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF343584.
MILAN Aaa CE
Moody's has re-assessed loan-by-loan information
to determine the MILAN Aaa CE. As a result, Moody's has increased
its MILAN Aaa CE assumption to 12% in HERMES VIII, 13%
in HERMES IX through XII and 7.5% in HERMES XV. This
increase is mainly driven by higher delinquency levels for a relatively
smaller outstanding portfolio compared to closing as well as by declining
house prices in the Netherlands.
- Exposure to Counterparty
Moody's rating analysis also took into consideration the set-off
risk arising from exposure to SNS Bank N.V. as originator
in the six transactions. This exposure is not driving today's
downgrade actions. Each of the six transactions benefits from a
commingling reserve which mitigates the risk of commingling arising from
exposure to SNS Bank N.V. as collection account bank.
- SENSITIVITY ANALYSIS
Expected loss assumptions remain subject to uncertainties such as the
future general economic activity, interest rates and house prices.
If realised recovery rates were to be lower or default rates were to be
higher than assumed, the rating would be negatively affected.
OTHER DEVELOPMENTS MAY NEGATIVELY AFFECT THE NOTES
Moody's describes additional factors that may affect the ratings in "Approach
to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow
Transactions" published on 18 July 2013.
The principal methodology used in these ratings was Moody's Approach to
Rating RMBS Using the MILAN Framework published in May 2013. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
In reviewing these transactions, Moody's used its cash flow model,
ABSROM, to determine the loss for each tranche. The cash
flow model evaluates all default scenarios that are then weighted considering
the probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, Moody's calculates
the corresponding loss for each class of notes given the incoming cash
flows from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss for each tranche is the sum product
of (1) the probability of occurrence of each default scenario and (2)
the loss derived from the cash flow model in each default scenario for
each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
LIST OF AFFECTED RATINGS
Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) VIII B.V.
....EUR20.5M C Notes, Confirmed
at Baa2 (sf); previously on Apr 23, 2013 Baa2 (sf) Placed Under
Review for Possible Downgrade
Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) IX B.V.
....EUR37.5M C Notes, Downgraded
to A3 (sf); previously on Apr 23, 2013 A1 (sf) Placed Under
Review for Possible Downgrade
....EUR15M D Notes, Downgraded to Ba2
(sf); previously on Apr 23, 2013 A2 (sf) Placed Under Review
for Possible Downgrade
....EUR28.5M E Notes, Downgraded
to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under
Review for Possible Downgrade
Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) X B.V.
....EUR31.5M C Notes, Downgraded
to A3 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
....EUR9M D Notes, Downgraded to Ba1
(sf); previously on Apr 23, 2013 A3 (sf) Placed Under Review
for Possible Downgrade
....EUR27.7M E Notes, Downgraded
to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under
Review for Possible Downgrade
Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) XI B.V.
....EUR31.5M C Notes, Downgraded
to Baa1 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
....EUR9M D Notes, Downgraded to Ba1
(sf); previously on Apr 23, 2013 A3 (sf) Placed Under Review
for Possible Downgrade
....EUR27.7M E Notes, Downgraded
to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under
Review for Possible Downgrade
Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) XII B.V.
....EUR44M B Notes, Downgraded to Aa2
(sf); previously on Oct 26, 2006 Definitive Rating Assigned
Aa1 (sf)
....EUR31.9M C Notes, Downgraded
to A2 (sf); previously on Oct 26, 2006 Definitive Rating Assigned
Aa3 (sf)
....EUR28.6M D Notes, Downgraded
to Baa3 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
....EUR40.7M E Notes, Downgraded
to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under
Review for Possible Downgrade
Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) XV B.V.
....EUR38.65M D Notes, Downgraded
to Baa1 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
....EUR26.1M E Notes, Downgraded
to B2 (sf); previously on Apr 23, 2013 Ba2 (sf) Placed Under
Review for Possible Downgrade
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of these transactions in the past
six months.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Maria Divid
Analyst
Structured Finance Group
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
Christophe de Noaillat
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
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 downgrades fifteen notes and confirms one note in six Dutch HERMES RMBS