Morningstar DBRS Confirms Credit Ratings on Two Green Apple Transactions

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit ratings on the respective Class A notes issued by Green Apple 2019-I NHG B.V. (Green Apple 2019-1) and Green Apple 2021-I B.V. (Green Apple 2021-1).

The confirmations follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the April 2024 payment date of each transaction;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at the AAA (sf) credit rating level.

The credit ratings address the timely payment of interest and the ultimate repayment of principal on or by the legal final maturity date in January 2058 for Green Apple 2019-1 and in January 2060 for Green Apple 2021-1. The credit ratings do not address the timely payment of any Class A excess consideration amounts due after the first optional redemption date in January 2026 for Green Apple 2019-1 and in January 2028 for Green Apple 2021-1.

The transactions are static securitisations collateralised by Dutch residential mortgage loans granted by Argenta Spaarbank N.V. in the Netherlands. Quion Services B.V. acts as the subservicer for the mortgage pools. Green Apple 2019-1 closed in June 2019 with an initial portfolio balance of EUR 937.4 million, consisting entirely of mortgage loans backed by a Nationale Hypotheek Garantie (NHG) while Green Apple 2021-1 closed in June 2021 with an initial portfolio balance of EUR 744.6 million.

PORTFOLIO PERFORMANCE
Green Apple 2019-1:
As of April 2024 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 0.1%, 0.1%, and 0.03% of the outstanding principal balance, respectively, while loans more than 90 days delinquent represented 0.1%.

Green Apple 2021-1:
As of the April 2024 payment date, there were no delinquent loans.

For both transactions, there have not been any foreclosed mortgage loans to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pools of receivables in both transactions. For Green Apple 2019-1, Morningstar DBRS updated its base case PD and LGD assumptions to 0.76% and 2.57%, respectively. For Green Apple 2021-1, Morningstar DBRS updated and maintained its base case PD and LGD assumptions to 1.04% and at 10.00%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective Class B notes and cash reserve provide credit enhancement to the Class A notes in each transaction.

As of the April 2024 payment date, credit enhancement to the Class A notes in Green Apple 2019-1 and Green Apple 2021-1 increased to 25.0% and 17.7% from 22.5% and 16.7%, respectively, at the time of the last annual review 12 months ago.

The transactions benefit from a nonamortising cash reserve, funded at closing to EUR 12.2 million for Green Apple 2019-1 and EUR 9.7 million for Green Apple 2021-1, using the proceeds of the Class C notes. The reserve provides credit and liquidity support to the Class A notes and is available to cover senior expenses and Class A interest payments as well as to clear any debit amounts on the Class A principal deficiency ledger. As of the April 2024 payment date, the reserve for Green Apple 2019-1 was at its target balance. The reserve for Green Apple 2021-1 was slightly below its target balance at EUR 9.6 million because of the negative excess spread situation that occurred in the second quarter of 2023 due to an interest rate mismatch, as the Class A notes pay a coupon linked to three-month Euribor while almost the entire portfolio consists of fixed-rate mortgages with long-term resets. This interest rate mismatch is currently mitigated by the presence of an interest rate cap agreement with a strike rate at 2.0% and the reserve is being replenished back to its target.

Additionally, the transactions benefit from liquidity support provided by a cash advance facility extended by BNG Bank N.V. (BNG Bank), with a maximum drawable amount equal to 1.5% of the outstanding Class A and Class B notes' balance, subject to a floor of EUR 9.4 million for Green Apple 2019-1 and EUR 5.6 million for Green Apple 2021-1.

BNG Bank acts as the account bank for the transactions. Based on Morningstar DBRS private credit rating on BNG Bank, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the Class A notes in both transactions, as described in Morningstar DBRS´ "Legal Criteria for European Structured Finance Transactions" methodology.

ABN AMRO Bank N.V. (ABN AMRO) acts as the interest rate cap provider for Green Apple 2019-1 while Société Générale, S.A. (Société Générale) acts as the interest rate cap provider for Green Apple 2021-1. Morningstar DBRS' Long Term Critical Obligations Credit Ratings of AA on both ABN AMRO and Société Générale are consistent with the first credit rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

Morningstar DBRS' long-term credit rating provides opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Social (S) Factors
In Green Apple 2019-1, Morningstar DBRS considered the presence of 100% of loans backed by the NHG guarantee to be a relevant credit rating factor (Social Impact of Product & Services) as outlined within the "Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings" framework. Morningstar DBRS assumed reduced loss severities for loans backed by an NHG guarantee as outlined in its "European RMBS Insight: Dutch Addendum". This is credit positive, but it did not affect the credit rating on the Class A notes in this transaction.

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

In Green Apple 2021-1, there were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework
can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors
in Credit Ratings (23 January 2024)
https://dbrs.morningstar.com/research/427030.

Morningstar DBRS analysed the transactions' structures 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" (7 March 2024), https://dbrs.morningstar.com/research/429051.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transactions 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://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include investor and servicer reports provided by Intertrust Administrative Services B.V. and loan-level data provided by the European DataWarehouse GmbH.

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

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

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

Morningstar DBRS 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 the transactions took place on 7 June 2023, when Morningstar DBRS confirmed its credit ratings on the respective Class A notes at AAA (sf).

The lead analyst responsibilities for these transactions have been transferred to Preben Cornelius Overas.

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

Sensitivity Analysis: To assess the impact of changing the transactions' parameters on the credit ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- Morningstar DBRS 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.
-- For Green Apple 2019-1, the base case PD and LGD of the current pool of loans for the Issuer are 0.8% and 2.6%, respectively.
-- For Green Apple 2021-1, the base case PD and LGD of the current pool of loans for the Issuer are 1.0% and 10.0%, respectively.

Green Apple 2019-1:
Class A Risk Sensitivity
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

Green Apple 2021-1:
Class A Risk Sensitivity
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

For further information on Morningstar DBRS 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 Morningstar DBRS 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: Preben Cornelius Overas, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates: 4 June 2019 (Green Apple 2019-1), 26 May 2021 (Green Apple 2021-1)

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The credit rating methodologies used in the analysis of these transactions can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (30 June 2023),
https://dbrs.morningstar.com/research/416730.
-- Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024),
https://dbrs.morningstar.com/research/427030.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572.
-- European RMBS Insight Methodology (25 March 2024) and European RMBS Insight Model v8.0.0.0,
https://dbrs.morningstar.com/research/430103.
-- European RMBS Insight: Dutch Addendum (11 March 2024),
https://dbrs.morningstar.com/research/429169.
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602.
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://dbrs.morningstar.com/research/420754.

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

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.