Obvion NV plans to issue €752.2 million ($1.02 billion) of securities backed by Dutch residential mortgages, according to Standard &Poor’s.

The transaction, STORM 2014-II, is managed by the issuer’s parent company, Rabobank International. Obvion has been an originator and servicer of residential mortgage loans in the Netherlands since 1980. In 2012, it became a wholly owned subsidiary of Rabobank Nederland.

S&P assigned preliminary ratings of ‘AAA’ to €700 million of class A notes. The trust will also issue €17.1 million of ‘AA+’ rated, class B notes; €13.1 million of ‘AA-’ rated, class C notes; and €14.5 million of ‘BBB’ rated class D notes. At closing, the trust will issue €7.5 million of unrated, class E notes.

The notes will pay interest at three-month EURIBOR, plus a margin, according to the S&P presale report. The legal final maturity date of the tranches is in March 2051.

The pool if comprised of 9,424 loans granted to 4,286 borrowers. The weighted-average current loan-to-value ratio is 96.72%,

Obvion may use the proceeds from the transaction to purchase further advances or new mortgage loans from the originator until June 22, 2019, up to a maximum limit of 10%. “This could impair the collateral's quality,” S&P stated in its presale report. “However, the transaction documents limit the potential deterioration by ensuring that substitutions can only take place under certain conditions and criteria. “

Construction loans make up 6.23% of the preliminary pool and the issuer can purchase additional construction loans up to June 2019, limited to 7% of the outstanding pool. “In our analysis, construction loans carry a higher foreclosure frequency and loss severity,” the report stated.    Rabobank Nederland's has provided a construction deposit guarantee, which covers the entire construction deposit amount, to mitigate risks associated with the loans.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.