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Global Credit Research - 18 Jun 2010
Approximately EUR4.370 billion of rated debt securities affected
London, 18 June 2010 -- Moody's Investors Service has taken the following credit rating actions
on the existing classes of notes issued by Holland Mortgage Backed Series
(HERMES) XV B.V. ("HERMES XV") The rating actions below,
reflect the restructuring of HERMES XV which was initially rated by Moody's
in May 2008. Under the revised structure, the total note
issuance has been reduced to 1,618.15 million from
2,900 million, the capital structure has changed and
the initial 5 year revolving period has been stopped (3 years still remaining).
- Euro 2,752,100,000 Senior Class A Mortgage-Backed
Notes 2008 due 2045, ratings withdrawn, previously rated Aaa
on 30 May 2008
- Euro 9,750,000 (previously Euro 23,200,000)
Mezzanine Class B Mortgage-Backed Notes due 2042, upgraded
to Aa1, previously rated Aa3 on 30 May 2008
- Euro 43,650,000 (previously Euro 78,300,000)
Mezzanine Class C Mortgage-Backed Notes due 2042, upgraded
to Aa2, previously rated A3 on 30 May 2008
- Euro 20,300,000 Junior Class D Mortgage-Backed
Notes due 2042, upgraded to A2, previously rated Ba1 on 30
- Euro 26,100,000 Subordinated Junior Class E Mortgage-Backed
Notes due 2042, upgraded to Ba2, previously rated Ba3 on 30
Assign new definitive ratings of:
- Aaa to Euro 1,500,000,000 Senior Class A Mortgage-Backed
Notes 2010 due 2042
- A2 to Euro 18,350,000 Junior Class D Mortgage-Backed
Notes 2010 due 2042
In response to the lower overall pool size of Euro 1.6 billion,
the existing note structure has been downsized. This involved the
existing A notes being fully redeemed and new A notes being issued,
the Class B and C note amounts partially redeemed and the Class D note
increased through the issuance of new Class D notes ranking parri passu.
The Class E note amount remained unchanged. The above new note
structure has resulted in greater credit enhancement under the senior,
mezzanine and junior notes which is one of the primary drivers to the
rating upgrades on these notes.
This transaction is the fifteenth securitisation of Dutch residential
mortgage loans under the HERMES series. The mortgage loans have
been originated by SNS Bank N.V., BLG Hypotheekbank
N.V. and SNS Regio Bank N.V. BLG Hypotheekbank
N.V. and SNS Regio Bank N.V. are wholly owned
subsidiaries of SNS Bank N.V. The assets supporting the
notes are prime mortgage loans secured by residential properties located
in the Netherlands. The security assignments closely follow the
security structure observed in other Dutch Residential Mortgage-Backed
There is no reserve fund in this transaction. An excess margin
of 35 bps is guaranteed over the life of the transaction through the interest
rate swap provided by Deutsche Bank A.G, London Branch (Aa3/P-1).
The cash advance facility (2.6% of current balance with
a floor of 0.5% of original balance) and the guaranteed
investment contract are provided by BNP Paribas (Aa2/P-1) and Rabobank
Netherlands (Aaa/P-1) respectively. The total credit enhancement
for the Aaa rated notes has been increased from 5.1% to
The expected portfolio loss of 0.75% of original balance
and the MILAN Aaa required credit enhancement of 5.4% serve
as input parameters for Moody's cash flow and tranching 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.
Current economic conditions in the Netherlands, with rising unemployment,
currently at 6.1% and forecasted to reach 7.1%
in Q4 2010, is likely to drive delinquencies up in the short to
medium term. Additionally, house prices have fallen by 3.2%
in Q1 2010 from their peak in Q3 2008. Nevertheless, house
prices have stabilised in H2 2009 and are steadily increasing since Q3
2009 as described in Moody's report "Dutch RMBS Indices", March
2010. Moody's has increased the expected loss assumption from 0.60%
at close in May 2008 to currently 0.75% or original balance
due to macroeconomic uncertainty and weaker performance of HERMES XV relative
to the Dutch RMBS market. Given the historical performance of the
Dutch RMBS market and the originator's previous transactions (in which
pools with similar risk characteristics have been securitised),
Moody's believes the assumed expected loss is appropriate for this transaction.
Key drivers for the MILAN Aaa CE number, which fell from 7.2%
to 5.4%, are the relatively low portion of loans with
LTfV above 100% (30.6% of the pool), higher
seasoning (3.7 years), removal of borrowers currently in
arrears, 94% of borrowers in the portfolio have been current
(i.e. not missed a payment ) for over 2 years and most notably
the transaction is no longer revolving.
Another key characteristic of this transaction is that approximately 33.1%
of the portfolio is linked to life insurance policies (life mortgage loans),
which are exposed to set-off risk if an insurance company goes
bankrupt. The seller has provided a sample of insurance company
counterparty data to estimate the set-off risk exposure in the
pool. Approximately 53% of all life insurance-linked
products are linked to insurance policies provided by REAAL Levensverzekeringen
N.V., which is not rated by Moody's. Moody's
has considered the rating of the parent company, SNS Reaal N.V.
(Baa1), and stress tested rating levels to measure the impact on
the ratings of the notes.
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.
Moody's did however deviate in 2 sub sections: i) Originator
historical performance variability: Moody's assigned a low/medium
(Dutch market is low) given HERMES XV performance relative to the Dutch
market has been weaker in both delinquencies and losses; and ii)
Disclosure of securitisation collateral pool characteristics: Moody's
assigned a medium (Dutch market is low/medium) due to incomplete loan
by loan information on employment data and insurance company counterparty
Moody's has had to rely on other less accurate sources of information
for its analysis.
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 a higher 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.
The principal methodologies used in rating the notes issued by HERMES
XV 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, "Moody's Updated Methodology
for Set-Off in Dutch RMBS," published in September 2009,
"Cash Flow Analysis in EMEA RMBS: Testing Structural Features with
the MARCO Model," published in January 2006 and available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
The ratings address 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 ultimate payment of principal
at par on or before the rated final legal maturity date. Moody's
ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
To obtain a copy of Moody's New Issue Report on this transaction,
please see Moody's website www.moodys.com or contact our
Client Service Desk in London +44-20-7772 5454.
Moody's will monitor this transaction on an ongoing basis. For
updated monitoring information, please contact firstname.lastname@example.org.
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
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Christophe de Noaillat
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's takes rating action on existing classes and assigns new definitive ratings on new Dutch RMBS notes issued by HERMES XV B.V.
No Related Data.
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