Moody’s Grades First Green-Bond Euro RMBS

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A first-ever European residential mortgage securitization of a preferred pool of green homes has been issued in The Netherlands.

GREEN STORM 2016 B.V. is an asset-backed portfolio of €271.3 million in prime residential loans originated by Dutch lender Obvion N.V. Although it is the 37th securitization undertaken by Obvion, it is the first where the priority criteria for pool inclusion included energy performance certification.

The transaction has garnered preliminary ratings from Moody’s Investors Service, as well as recognition of its potential ground-breaking influence on criteria for environmentally conscious investing. Moody’s assigned it first worlwide Green Bond Assessment grade to a financing vehicle used to promote environmental projects – in this case its top-shelf ‘GB1’ assessment, on a scale of 1 (excellent) to 5 (poor).

 “This is the first European RMBS where the loans were selected based on the energy efficiency of the underlying properties,” said Moody’s vice president and senior credit officer Olga Gekht, in a release. “The transaction may well pave the way for future green issuance.”

The transaction was arranged by Rabobank, and managed by Rabobank of Societe Generale.

Moody’s GBA are a transaction opinion assessing the issuer’s effectiveness in managing, allocating assets and reporting on environment projects financed by green-bond proceeds. The GBAs are not ratings, the agency stated. They will apply to other debt instruments focused on environmental-friendly investments, in addition to securitizations.

Tranche sizes are to be determined for the final size of the five classes of notes rated by Moody’s, although 96.01% of the ultimate value of the notes will be placed into the top Class A slice that has a preliminary ‘Aaa’ structured-finance rating. The Class A notes will be supported 5.03% in credit enhancement comprised of 3.99% subordination and a 1.04% reserve fund account.

Moody’s presale report states that the transaction fulfills an Obvion mission to increase and promote energy efficient housing. Obvion’s pool for GREEN STORM are the homes that it evaluated as among the 15% highest-rated Dutch residential buildings. That criteria is not only for green-friendly characteristics such as efficiency upgrades, but the homes’ standing in meeting low-carbon impact standards during construction.

In addition to the prime nature of the 1,263 loans in the pool, more than 50% are 30-year, fixed-rate loans supported by The Netherlands’ version of Fannie Mae or Freddie Mac: the NHG public loan mortgage guarantee program used to promote home ownership. They are seasoned an average of 3.24 years. Most of the loans (64%) were originated between 2012-2015.

Moody’s notes concerns over the lack of a corporate credit rating for Obvion, and the high proportion of interest-only loans in the pool not associated with a repayment vehicle (which is common in Dutch prime RMBS deals).

"Our GB1 grade for Obvion N.V.'s deal reflects the excellent environmentally oriented approach to managing the conservatively selected pool of Dutch residential mortgages based on the adherence of their energy efficiency coefficients to energy labeling standards for new homes in the Netherlands," says Henry Shilling, a senior vice president at Moody's, in a statement.

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