Moody's also affirms tranches in four RMBS and ABS transactions originated by DSB Bank N.V.
London, 23 May 2016 -- Moody's Investors Service today upgraded its ratings in two RMBS and two
ABS transactions backed by loans that the now-bankrupt Dutch DSB
Bank N.V. originated: Monastery 2004-I B.V.
(Monastery 2004), Monastery 2006-I B.V. (Monastery
2006), Chapel 2003-I B.V. (Chapel 2003) and
Chapel 2007 B.V. (Chapel 2007). In addition,
Moody's upgraded the Counterparty Instrument Rating on the interest rate
swap in Chapel 2003 and affirmed the rating on the liquidity facility
in Chapel 2007.
A detailed list of today's rating actions is at the end of the Ratings
Rationale section.
RATINGS RATIONALE
Today's upgrades are prompted by a pay-out from the DSB Bank N.V.
bankruptcy estate to the issuers representing a 100% recovery on
the special-purpose vehicle's (SPV) counterclaims for all DSB Bank
N.V. transactions. The positive rating action also
reflects lower than previously anticipated borrowers compensations relating
to duty of care (DoC) claims linked to DSB Bank N.V.'s lending
and intermediation practices in Chapel 2003 and Chapel 2007. Moody's
took into consideration the operational risk in the transactions.
In Chapel 2007, Monastery 2004 and Monastery 2006, the rating
action on the senior notes takes into account the risk of payment disruptions.
-- PAY-OUT RATIO FROM DSB BANK N.V.'S
BANKRUPTCY ESTATE LEADS TO HIGHER RECOVERIES THAN ANTICIPATED
The issuers have counter-claimed the compensation amounts set off
against the loans in the respective portfolios from DSB Bank N.V.'s
bankruptcy estate. The bankrupt entity made a material payment
distribution in February 2016, resulting in a total pay-out
of 100% on due care claims.
As a result, all four transactions received or will receive a pay-out
equivalent to 100% of all claims filed in the bankruptcy as at
their last payment date or on their next payment date. This represents
a substantial increase from the 74% pay-out distributed
in December 2014.
These higher than expected recoveries from the bankruptcy estate lead
to increased credit enhancement levels in all four transactions,
through either a decrease and/or a curing of the PDL, or through
a replenishment of the reserve fund.
-- LOWER EXPECTATIONS OF COMPENSATION FOR BORROWERS DoC
COMPLAINTS ON DSB BANK N.V.'S LENDING PRACTICES FOR CHAPEL
2003 AND CHAPEL 2007
In December 2015, Intertrust Management B.V.,
director of the SPVs, provided noteholders with updated expectations
of DoC claims. For Chapel 2003 and Chapel 2007, these amounts
are slightly below the estimated figures provided by the bankruptcy trustee
in May 2015.
Borrowers had until November 2015 to submit due care claims under the
framework agreement that was ratified in November 2014 by the Amsterdam
Court of Appeal.
Intertrust Management B.V. received an assessment from the
bankruptcy trustees of the maximum DoC amounts in all four transactions
based on (a) the number of claims already received; (b) the influx
of new claims; and (c) the reduced timeline for borrowers to submit
their due-care claims. Bankruptcy trustees revised the maximum
DoC amount to €50.5 million in Chapel 2003 and €48 million
in Chapel 2007, down from €55 million and €52 million
respectively. In Monastery deals, the maximum DoC amount
remains the same as in May 2015: €6.5 million in Monastery
2004 and €13 million in Monastery 2006.
The remaining DoC amounts represent a potential future loss of 0.3%
of Chapel 2003's current pool balance, 0.4% for Chapel
2007, 0.1% for Monastery 2004 and Monastery 2006.
-- REVISION OF KEY COLLATERAL ASSUMPTIONS
As a part of its detailed transaction review, Moody's reassess its
lifetime loss expectation for each securitised portfolio reflecting the
collateral performance to date as well as the future macro-economic
environment.
Monastery 2004 is performing modestly worse-than-anticipated
as at the last rating review. As a result, Moody's increased
its expected loss assumptions to 2.45% from 2.2%
of original balance. Moody's maintained its key collateral assumptions
for Monastery 2006, Chapel 2003 and Chapel 2007, which continue
to perform in line with expectations.
-- COUNTERPARTY EXPOSURE
Today's rating actions took into consideration the notes'
exposure to relevant counterparties, such as servicer, account
banks or swap providers.
Following DSB Bank N.V.'s bankruptcy, the bankruptcy
trustees entered into a sub-delegation agreement with Quion Groep
B.V. (not rated). The servicing transfer took place
successfully in June 2013. DSB Bank N.V. continues
to service the due care claims, with the bankruptcy trustee committed
to run-off the portfolio for the next four years. Additionally,
Vesting Finance and Ultimoo were appointed as special servicers in May
2015, servicing the loans with arrears of 12 months or more.
The liquidity facilities represent 4.4% of Chapel 2003 's
note balance, 4.9% of Chapel 2007, 5.0%
of Monastery 2004 and 3.6% of Monastery 2006. Moody's
believes that the liquidity is sufficient to support interest payments
on the notes in case of servicer disruption.
The mitigants to payment disruption have been tested in the 4 transactions
following the bankruptcy of DSB Bank N.V. Moody's concludes
that the maximum achievable rating for the senior notes remains Aa3 (sf).
The ratings of the class A2 in Chapel 2007, the class A2,
B, C and D notes in Monastery 2004 and the class A2 and B notes
in Monastery 2006 are constrained by operational risks.
COUNTERPARTY INSTRUMENT RATINGS IN CHAPEL DEALS
Moody's upgraded the interest rate swap to Aa3 (sf) from A1 (sf) in Chapel
2003 and affirmed the Aa3 (sf) of the liquidity facility in Chapel 2007.
These ratings measure the expected losses to the counterparties if the
respective issuer is unable to honour its obligations under the referenced
financial contracts by maturity.
Repayment of the interest rate swap in Chapel 2003 and the liquidity facility
in Chapel 2007 rank senior to the rated notes in the payment waterfall.
They are linked to the performance of the underlying assets and are both
constrained by operational risks.
The principal methodology used in rating Monastery 2004 and Monastery
2006 was "Moody's Approach to Rating RMBS Using the MILAN Framework" published
in January 2015. Please see the Ratings Methodologies page on www.moodys.com
for a copy of this methodology.
The analysis undertaken by Moody's at the initial assignment of these
ratings for RMBS securities may focus on aspects that become less relevant
or typically remain unchanged during the surveillance stage. Please
see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further
information on Moody's analysis at the initial rating assignment and the
on-going surveillance in RMBS.
The principal methodology used in rating Chapel 2003 and Chapel 2007 was
"Moody's Approach to Rating Consumer Loan-Backed ABS" published
in September 2015. Please see the Ratings Methodologies page on
www.moodys.com for a copy of this methodology.
Other factors used in rating the interest rate swap in Chapel 2003 and
the liquidity facility in Chapel 2007 are described in "Moody's Approach
to Counterparty Instrument Ratings" published in June 2015.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the ratings
include 1) better-than-expected collateral performance;
2) deleveraging of the capital structure and 3) improvement in the credit
quality of the transaction's counterparties.
Factors or circumstances that could lead to a downgrade of the ratings
include 1) worse-than-expected collateral performance;
2) deterioration in the notes' available credit enhancement and 3) deterioration
in the credit quality of the transaction counterparties.
LIST OF AFFECTED RATINGS:
Issuer: Chapel 2003-I B.V.
....EUR890M A Notes, Affirmed Baa1 (sf);
previously on Jul 31, 2015 Upgraded to Baa1 (sf)
....EUR39M B Notes, Upgraded to B3 (sf);
previously on Dec 2, 2011 Downgraded to Ca (sf)
....Interest Rate Swap, Upgraded to
Aa3 (sf); previously on Jul 31, 2015 Upgraded to A1 (sf)
Issuer: Chapel 2007 B.V.
....EUR300M A2, Affirmed Aa3 (sf);
previously on Jul 31, 2015 Upgraded to Aa3 (sf)
....EUR13.8M B, Upgraded to A1
(sf); previously on Jul 31, 2015 Upgraded to Baa1 (sf)
....EUR23.5M C, Upgraded to A3
(sf); previously on Jul 31, 2015 Upgraded to Ba2 (sf)
....EUR17.9M D, Upgraded to Ba1
(sf); previously on Dec 2, 2011 Confirmed at Ca (sf)
....EUR13.8M E, Upgraded to Ba3
(sf); previously on May 31, 2011 Downgraded to C (sf)
....Liquidity Facility Rating, Affirmed
Aa3 (sf); previously on Jul 31, 2015 Upgraded to Aa3 (sf)
Issuer: Monastery 2004-I B.V.
....EUR604.5M A2 Notes, Affirmed
Aa3 (sf); previously on Jul 31, 2015 Upgraded to Aa3 (sf)
....EUR24.5M B Notes, Affirmed
Aa3 (sf); previously on Jul 31, 2015 Upgraded to Aa3 (sf)
....EUR21.5M C Notes, Affirmed
Aa3 (sf); previously on Jul 31, 2015 Upgraded to Aa3 (sf)
....EUR8.5M D Notes, Upgraded
to Aa3 (sf); previously on Jul 31, 2015 Upgraded to A3 (sf)
....EUR10.5M E Notes, Upgraded
to Ba3 (sf); previously on Jul 31, 2015 Upgraded to B3 (sf)
Issuer: Monastery 2006-I B.V.
....EUR663.6M A2 Notes, Affirmed
Aa3 (sf); previously on Jul 31, 2015 Upgraded to Aa3 (sf)
....EUR28M B Notes, Affirmed Aa3 (sf);
previously on Jul 31, 2015 Upgraded to Aa3 (sf)
....EUR28.7M C Notes, Upgraded
to Baa3 (sf); previously on Jul 31, 2015 Upgraded to Ba1 (sf)
....EUR9.5M D Notes, Upgraded
to B3 (sf); previously on Dec 2, 2011 Confirmed at Ca (sf)
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
In rating this transaction, Moody's used a cash flow model
to model cash flow stress scenarios to determine the extent to which investors
would receive timely payments of interest and principal in the stress
scenarios, given the transaction structure and collateral composition.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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.
Anne-Sophie Spirito
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Germain Fargue
Associate 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
Carole Sanz-Paris
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
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Moody's upgrades tranches in four RMBS and ABS transactions originated by DSB Bank N.V.
