Scope Ratings (Scope) has affirmed the BBB_SF rating of the Inhaberschuldverschreibung (credit-linked note) issued by Herrenhausen Investment S.A. via its Compartment I.

RATING RATIONAL
Scope affirmed the rating based on the solid credit performance of the reference portfolio, in line with our expectations. In addition, the stable credit profile of Deutsche Hypothekenbank Actien-Gesellschaft acting as account bank and holding the cash collateral of the notes does not negatively impact the rating of the notes.

COLLATERAL PERFORMANCE
Based on the latest performance reporting from Deutsche Hypothekenbank, dated November 2014, the credit risk of the reference portfolio has slightly decreased. The reference portfolio amortised down to 95.7% of the initial balance reflecting 2.7% of loan prepayments. In particular, two loans from those with the lowest credit quality in the portoflio, and accounting for an aggregate amount of EUR 22.2m, have amortised in full. No defaults have been reported since inception of the transaction. In addition, the evolution of the credit risk of the reference portfolio based on Deutsche Hypothekenbank´s internal measures and dated November 2014, suggests a slight improvement in credit quality.

ABOUT THE ISSUER
Herrenhausen Investment S.A. is bankruptcy remote SPV under Luxembourg law. Its Compartment I currently has a EUR 57.4m credit-linked note (CLN) outstanding, which is synthetically exposed to the mezzanine credit risk of a EUR 1,234.5m commercial real estate portfolio originated by Deutsche Hypothekenbank. The risk transfer is achieved by means of a fully funded bilateral guarantee of the issuer to Deutsche Hypothekenbank. The bank is the major counterparty in this transaction, the servicer, the payor of the guarantee payment and most importantly the cash account provider. Especially the role as cash account provider exposes the CLN to the credit risk of Deutsche Hypothekenbank, which constrains the rating of the CLN.

MODELS AND SENSITIVITY ANALYSIS
Neither re-modelling nor sensitivity analysis have been judged necessary to affirm the rating given the limited changes in model inputs compared to those used by Scope upon initial rating assignment.

For reference of the specific rating approach, please see the initial rating report for Herrenhausen Investment S.A. - Compartment I - Inhaberschuldverschreibung, published by Scope 16 May 2014 (link).
 

REGULATORY AND LEGAL DISCLOSURES

Important information
Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
The party responsible for the dissemination of the financial analysis is Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB 161306 B, Chief Executive Officer: Torsten Hinrichs.

The rating analysis has been prepared by Sebastian Dietzsch, Lead Analyst. Guillaume Jolivet, Committee Chair, is the analyst responsible for approving the rating.

Rating history
Instrument ISIN   Date          Rating action    Rating
DE000A1ZFBA0   25.03.2014  Preliminary        (P)BBB_SF
DE000A1ZFBA0   16.05.2014  Initial                 BBB_SF

Information on interests and conflicts of interest
The rating was prepared independently by Scope Ratings but for a fee based on a mandate of the issuer of the investment, represented by the management company.

As at the time of the analysis, neither Scope Ratings AG nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings AG or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, nor any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating.

Key sources of Information for the rating
Quarterly performance reporting (latest November 2014), individual underlying asset information, legal transaction documentation, third party valuation reports and expert opinions.

Scope Ratings considers the quality of the available information on the evaluated entity to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently.

Examination of the rating by the rated entity prior to publication
Prior to publication, the rated entity was given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full working day, to point out any factual errors, use of confidential information, or to appeal the rating decision and deliver additional material information. Following that examination, the rating was not modified.

Methodology
The methodology applicable for this rating is “Rating Methodology Guidelines - Structured Finance Instruments”, dated July 2014, available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency’s website.

Conditions of use / exclusion of liability
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Rating issued by
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