Ratings Assigned To Dutch RMBS Transaction Green Storm 2018

Stocks and Financial Services Press Releases Wednesday May 30, 2018 17:01
MOSCOW--30 May--S&P Global Ratings

MOSCOW (S&P Global Ratings) May 30, 2018--S&P Global Ratings today assigned its credit ratings to Green STORM 2018 B.V.'s residential mortgage-backed floating-rate class A, B, C, and D notes. At closing, GREEN STORM 2018 also issued unrated class E notes.

Green STORM 2018 is Obvion N.V.'s 41st securitization of Dutch mortgage loans in the STORM series. The transaction's mechanisms are similar to its predecessor, Green STORM 2017 B.V. Green STORM 2018 features a revolving period and before the first optional redemption date, it may acquire new loans, replacement loans, and the further advances that the originator may make to borrowers. The transaction securitizes a pool of performing loans secured on first- and consecutive-ranking Dutch mortgages, which Obvion originated and services.

Green STORM 2018 only securitizes assets that comply with the "green" eligibility criteria in Obvion's book. These criteria relate to the residential properties having certain energy performance certificates. In our view, and based on historical information that we have received on these types of loans, we expect Green STORM 2018 to perform in line with other STORM transactions.

Obvion is the originator and seller of the assets. Since 2012, it has been a wholly owned subsidiary of Cooperatieve Rabobank U.A. Obvion has been an established originator and servicer in the Netherlands since 1980. It distributes mortgage loans through the independent intermediary channel. Its underwriting criteria are largely determined by the Code of Conduct (introduced in January 2007 by the Dutch Association of Banks; it is updated from time to time) and the National Hypotheek Garantie (NHG) guarantee criteria for the NHG loans.

Our credit ratings reflect our assessment of the transaction's payment structure, cash flow mechanics, and the results of our cash flow analysis to assess whether the notes would be repaid under stress test scenarios. The transaction's structure relies on a combination of subordination, excess spread, a cash advance facility, and a reserve fund to cover credit losses and income shortfalls. Additionally, it benefits from payments from Waarborgfonds Eigen Woningen (WEW) under the NHG guarantee scheme to reduce foreclosure losses for certain loans. Taking these factors into account, we consider the credit enhancement available to the rated notes sufficient to support the credit ratings that we have assigned.

Our credit ratings on the class B, C, and D notes take into account an optional redemption starting from May 2023, whereby these classes can be redeemed at the outstanding principal minus any accrued principal deficiency. Our cash flow model results reflect the passing rating levels at which principal deficiency ledger stays nil during the entire life of the respective tranches. However, the presence of this optional redemption feature is not commensurate with our 'AAA' rating definition, that the issuer has an extremely strong capacity to meet its financial obligations. The ratings on the class B, C, and D notes therefore cannot exceed a 'AA+' rating level. This constrains our credit rating for class B notes to 'AA+ (sf)'.

Since we assigned the preliminary ratings, no material changes were made to the transaction structure. However, the closing pool resulted in a lower credit cover compared to the preliminary pool at all rating levels. This contributed to class D notes passing 'A' cash flow stress compared to 'A-' at the preliminary stage. Considering the final cash-flow model output, and the scenario analysis meeting our credit stability criteria, we have assigned a 'A (sf)' rating to the class D notes.


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