S&P Assigns Prelim Rtgs in Dutch RMBS Deal Hermes VI.Business Editors LONDON--(BUSINESS WIRE)--April 8, 2003 (Standard & Poor's)--Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. today assigned its preliminary credit ratings in only the third Dutch RMBS RMBS Residential Mortgage-Backed Securities RMBS Rambus, Inc. (NASDAQ stock symbol) RMBS Russian Mortgage-Backed Securities transaction in which the ratings on the notes have been able to be delinked from the ratings on the supporting insurance policy providers (see list below). The transaction has been originated by SNS Bank SNS Bank is a Dutch retail bank offering financial products to both companies and individuals. SNS Bank was formed out of a merger of several savings banks in the Netherlands. N.V., a midsize Dutch retail bank and member of the SNS SNS sympathetic nervous system. Reaal Group. The floating-rate notes Floating-rate note (FRN) Note whose interest payment varies with short-term interest rates. floating-rate note An unsecured debt issue with an interest rate that is reset at specified intervals (usually every six months) according to a will be issued by special-purpose entity Special-Purpose Entity A financing technique in which a company decreases its risk by creating separate partnerships, rather than subsidiaries, for certain holdings and solicits outside investors to take on the risk. Holland Euro-Denominated Mortgage-Backed Series (Hermes) VI B.V. "As is well documented (see commentary reference below), all Dutch RMBS transactions are exposed to a measure of set-off risk," said Brian Kane, director at Standard & Poor's Structured Finance Ratings group in London. Mr. Kane explained that the group found comfort with this risk through a combination of three factors, including a structural feature unique to this transaction. "In the first instance we were able to delink the ratings on the notes from those on the insurance companies because the transaction includes more than 45 insurance companies, thereby weakening any set-off risk," he said. "The credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing at closing will be sized to cover the maximum exposure likely owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de an insolvency of any one insurance company." James Cuby, associate at the group, added that the risk of set-off increases over time as the value of the insurance policy increases. "To mitigate this increasing set-off risk, excess spread will be trapped after the call date instead of leaving the structure. This excess spread amounts to 45 basis points (bps) per year," he said. This trapped excess spread allows for notes to amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. in a reverse sequential fashion, starting on the call date with the class C notes, he explained. "This unique feature essentially creates additional overcollateralization after the call date, which has helped Standard & Poor's rate the senior notes 'AAA'," Mr. Cuby concluded. The full presale report for this transaction was published on April 8, 2003 and is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. The presale report can also be found on Standard & Poor's Web site at www.standardandpoors.com. Click on Fixed Income; then, in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. under Browse by Sector, select Structured Finance; scroll down to Presale Credit Reports to locate the article. A copy of Standard & Poor's commentary report, published Sept. 25, 2002, entitled "Set-Off in Certain Dutch Mortgage Products and its Effect on Rating RMBS", is also available on RatingsDirect. Alternatively, call one of Standard & Poor's Ratings Desks: London (44) 20-7847-7400; Paris (33) 1-4420-6705; Frankfurt (49) 69-33-999-223; or Stockholm (46) 8-440-5916. Members of the media may contact the Press Office Hotline on (44) 20-7826-3605 or via media_europe@standardandpoors.com.
RATINGS LIST
Holland Euro-Denominated Mortgage-Backed Series (Hermes) VI B.V.
EUR1.245 Billion (Equivalent) Mortgage-Backed Floating-Rate Notes
Class Preliminary Amount
ratings
A1 AAA Euro-denominated(a)
A2 AAA U.S. dollar-denominated(a)
B A EUR70 million
C BBB EUR30 million
(a) The exact split between the class A1 and A2 notes is yet to be
determined but will total EUR1.145 billion.
ANALYST E-MAIL ADDRESSES
james_cuby@standardandpoors.com
brian_kane@standardandpoors.com
karen_naylor@standardandpoors.com
sean_hannigan@standardandpoors.com
StructuredFinanceEurope@standardandpoors.com
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