Fitch Affirms Candide Financing Series
The prime Dutch RMBS transactions comprise loans originated by Bank of Scotland, Amsterdam Branch, which is a 100%-owned subsidiary of Lloyds Banking Group plc (A+/Stable/F1).
KEY RATING DRIVERS
Increasing Sold Repossessions and Losses
As of September 2015, late stage arrears (loans with more than three monthly instalments overdue) were reported at 0.7% (+5bps yoy), 0.4% (-40bps yoy) and 0.3% (-13bps yoy) of the current portfolio balance in Candide 2008, 2008-2 and 2011. The Dutch Prime RMBS Index was 0.7%. However, the general improvement in arrears is offset by an increase in repossessions and losses. The cumulative balance of mortgages with collateral that has been repossessed and sold accounts for 2.2% (+50bps yoy), 1.8% (+57bps yoy) and 1.1% (+36bps yoy) of the original pool balances. Realised losses have increased to 0.7% in Candide 2008 and 2008-2 (+16bps and +20bps yoy, respectively) and to 0.26% (+11bps yoy) in Candide 2011.
The index currently reports cumulative repossessions at 0.7% and losses at 0.2%. Fitch believes the higher than average LTVs and DTI ratios are the main reasons for the worse than average asset performance, particularly for the deals originated in 2008.
Sufficient Credit Enhancement
Realised losses have been fully provisioned for using the gross excess spread generated by the structures, allowing the reserve funds to remain at their target levels. Credit enhancement ranges between 1.5% (class B notes, Candide 2011) and 15.6% (class A notes - Candide 2008) of the current portfolio balance, which is sufficient to affirm the ratings. The revision of the Outlook on the class A notes in Candide 2008-2 to Negative reflects the lower protection available to this tranche compared with the class A notes in Candide 2008.
Payment Interruption Risk Mitigated
The risk associated with an interruption in servicing activity is mitigated by fully funded dedicated reserves, accounting for 2%, 3.3% and 1.7% of the transactions' current class A and B notes' balance. The liquidity funds are sufficient to cover more than 2 interest payment dates of scheduled interest payments and senior fees, calculated under stressed Euribor assumptions.
Interest Only (IO) Concentration
The transactions have a concentration of more than 20% of IO loans maturing within a three-year period during the lifetime of the transaction. As per its criteria, Fitch carried out a sensitivity analysis assuming a 50% default probability for these loans, which showed that CE is able to accommodate these stresses. No rating action was deemed necessary as a result of the IO loan concentration.
RATING SENSITIVITIES
Deterioration in asset performance may result from economic factors, in particular of unemployment. A corresponding increase in foreclosures, beyond Fitch's standard assumptions, could result in a downward pressure on excess spread and greater reliance on the respective reserve funds, thereby resulting in negative rating action.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Applicable to Candide 2008 and 2008-2: Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Applicable to Candide 2011:
Prior to the transaction closing, Fitch did not review the results of a third party assessment conducted on the asset portfolio information.
Prior to the transaction closing, Fitch conducted a review of a small targeted sample of Bank of Scotland, Amsterdam Branch's origination files, which indicated that updates to loan details are not always completed on the system. These findings were considered in this analysis by applying a lender adjustment factor to the base default probability for this transaction.
Overall and together with the assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Lloyds Bank as at August (Candide 2008) and July 2015 (Candide 2008-2 and Candide 2011)
- Transaction reporting provided by Lloyds Bank as at September (Candide 2008), October (Candide 2008-2) and August 2015 (Candide 2011)
Candide Financing 2008 B.V.
Class A (XS0358345592) affirmed at 'AAAsf'; Outlook Stable
Candide Financing 2008-2 B.V.
Class A (XS0392368345) affirmed at 'AAAsf'; Outlook revised to Negative from Stable
Candide Financing 2011-1 B.V.
Class A (XS0625067680) affirmed at 'AAAsf'; Outlook Stable
Class B (XS0625071526) affirmed at 'BBsf'; Outlook Stable.
Комментарии