Press Release

DBRS Morningstar Confirms Credit Ratings on Jubilee Place 5 B.V.

RMBS

November 01, 2023

DBRS Ratings GmbH (DBRS Morningstar) confirmed its credit ratings on the loan and notes issued by Jubilee Place 5 B.V. (the Issuer) as follow:

-- Class A loan at AAA (sf)
-- Class B notes at AA (sf)
-- Class C notes at A (sf)
-- Class D notes at BBB (high) (sf)
-- Class E notes at BB (high) (sf)
-- Class F notes at BB (low) (sf)

The credit rating on the Class A loan addresses the timely payment of interest and the ultimate payment of principal by the legal final maturity date in July 2059. The credit rating on the Class B notes addresses the timely payment of interest when most senior and the ultimate payment of principal by the legal final maturity date. The credit ratings on the Class C to Class F notes (together with the Class B notes, the Notes) address the ultimate payment of interest and principal by the legal final maturity date. DBRS Morningstar does not rate the Class G or Class R notes also issued in this transaction.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults, and losses as of the October 2023 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A loan and to the Notes to cover the expected losses at their respective credit rating levels.

The transaction is a bankruptcy-remote special-purpose vehicle incorporated in the Netherlands. The Issuer used the proceeds from the Class A loan and the Notes to fund the purchase of Dutch mortgage receivables originated by Dutch Mortgage Services B.V., DNL 1 B.V., and Community Hypotheken B.V (together, the originators), which were acquired from Citibank, N.A., London Branch. The originators are specialised residential buy-to-let real estate lenders operating in the Netherlands and started their lending businesses in 2019. They operate under the mandate of Citibank, which defines most of the underwriting criteria and policies.

PORTFOLIO PERFORMANCE
As of the October 2023 payment date, loans up to three months in arrears represented 0.2% of the outstanding portfolio balance, up from 0.0% from closing date one year ago. The 90-plus days delinquency ratio and the cumulative default ratio both remained at 0.0% in the same period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its Base Case PD and LGD assumptions, corresponding to the B (sf) credit rating level, to 7.5% and 10.5%, respectively.

CREDIT ENHANCEMENT
As of the October 2023 payment date, DBRS Morningstar calculated the credit enhancement for the Class A loan at 15.7%, which is provided by the subordination of the Class B to Class G notes. Credit enhancement for the Class B notes is 10.1% and is provided by the subordination of the Class C to Class G notes. Credit enhancement for the Class C notes is 7.3% and is provided by the subordination of the Class D to Class G notes. Credit enhancement for the Class D notes is 5.6% and is provided by the subordination of the Class E to Class G notes. Credit enhancement for the Class E notes is 4.5% and is provided by the subordination of the Classes F and G notes. Credit enhancement for the Class F notes is 3.4% and is provided by the subordination of the Class G notes.

The transaction benefits from an amortising liquidity reserve fund (LRF) that can be used to cover shortfalls on senior expenses and interest payments on the Class A loan. The LRF was partially funded at closing at 0.75% of the initial balance of the Class A loan and was built up until it reached its target of 1.25% of the outstanding balance of the Class A loan. The LRF is floored at 0.5% of the initial balance of the Class A loan. The LRF indirectly provides credit enhancement for the Class A loan and all classes of notes, as released amounts are part of the principal available funds. As of the October 2023 payment date, the LRF was EUR 4.3 million.

Citibank Europe plc, Netherlands Branch acts as the account bank for the transaction. Based on the private credit rating of the account bank, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the AAA (sf) credit rating assigned to the Class A loan, as described in DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

Citibank Europe plc acts as the interest rate swap counterparty for this transaction. DBRS Morningstar's public Long-Term Issuer Rating of AA (low) on Citibank Europe plc is consistent with the first credit rating threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar’s credit ratings on the Class A loan and the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit ratings on the Class A loan and the Notes also address the credit risk associated with the increased rate of interest applicable to the Class A loan and the Notes if the Class A loan and the Notes are not redeemed on the Optional Redemption Date in accordance with the applicable transaction documents.

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that the Issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) CONSIDERATIONS
Environmental Factors
Emissions, Effluents, & Waste is a relevant ESG factor. A Green Energy Label discount of 0.10% is applied to the interest rate/interest rate margin of loans backed by properties with an energy label of A or B at origination. For loans associated with properties with an energy label below B, a 0.15% discount is applied to their rates where the energy label has improved at least one notch within the first 6 months since origination. The lower interest rate has a positive impact on our default assumptions.

There were no Social or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-credit ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the “Master European Structured Finance Surveillance Methodology” (22 October 2023), https://www.dbrsmorningstar.com/research/422281/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release.

DBRS Morningstar materially deviated from its “European RMBS Insight: Dutch Addendum” methodology when determining the credit ratings assigned to the Class D to Class F notes by applying a custom high conditional prepayment rate (CPR) scenario instead of the standard high CPR stress scenario of 20% from day one. The material deviation is warranted given the concentration of fixed-rate loans with an early repayment charge during the fixed period in this portfolio. Hence, DBRS Morningstar expects prepayment rates to remain low during the fixed-rate period and increase when borrowers come to the end of their fixed-rate period. To reflect this, DBRS Morningstar assumed a custom high CPR vector with CPR rates below 20% while loans are in a fixed-rate period followed by a period of CPR rates exceeding 20% when most loans in the portfolio come to the end of the fixed-rate period.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/421590/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these credit ratings include investor reports provided by Citibank N.A., and loan-level data provided by EuroABS.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit ratings, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the credit rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 1 November 2022, when DBRS Morningstar finalised its provisional credit ratings on the notes.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS Morningstar credit ratings, including definitions, policies and methodologies is available at www.dbrsmorningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit rating (the Base Case):
-- DBRS Morningstar expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer at the B (sf) credit rating level are 7.5% and 10.5%, respectively.
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the credit rating of the Class A loan would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the credit rating of the Class A loan would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the credit rating of the Class A loan would be expected to fall to AA (low) (sf).

Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)

Class B Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in LGD, expected credit rating of A (high) (sf)
-- 25% increase in PD, expected credit rating of AA (low) (sf)
-- 50% increase in PD, expected credit rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)

Class C Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (sf)
-- 50% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD, expected credit rating of A (sf)
-- 50% increase in PD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)

Class D Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)

Class E Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BB (high) (sf)
-- 50% increase in PD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)

Class F Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in LGD, expected credit rating of BB (low) (sf)
-- 25% increase in PD, expected credit rating of BB (low) (sf)
-- 50% increase in PD, expected credit rating of BB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of B (high) (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 20 October 2022

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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