DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A notes issued by DOMOS 2017 (the Issuer).
The rating on the Class A addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The rating action follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their current rating level.
The Issuer is a securitisation of French housing loans originated and serviced by BNP Paribas Personal Finance SA. The proceeds from issuing the notes have been used to fund the purchase of a portfolio of fixed-rate and variable-rate housing loans. Interest payments on the notes are currently semi-annual, and will switch to monthly if an Accelerated Redemption Event occurs. The transaction’s revolving period ended in August 2018.
As of August 2018, two- to three-month arrears represented 0.1% of the outstanding portfolio balance, stable since August 2017. As of August 2018, the 90+ delinquency ratio was 0.3%, up from 0.1% in August 2017, and the cumulative default ratio was 0.2%.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 5.1% and 19.6%, respectively.
As of the August 2018 payment date, CE to the Class A notes was 21.9%, stable since the DBRS initial rating because of the transaction’s revolving period. CE consists of subordination of the Class B notes as well as partial credit support provided by the General Reserve.
The General Reserve is non-amortising and currently at the target amount of EUR 64.5 million. The reserve provides liquidity support through covering shortfalls in senior fees and interest on the Class A notes. The portion of the General Reserve equal to the difference between the required balance and the minimum balance provides credit support and forms part of principal proceeds upon the occurrence of an Accelerated Redemption Event.
BNP Paribas Securities Services SCA acts as the account bank for the transaction. Based on the DBRS private rating of BNP Paribas Securities Services SCA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
BNP Paribas Personal Finance acts as the swap counterparty for the transaction. DBRS's private rating of BNP Paribas Personal Finance is above the First Rating Threshold as described in DBRS's "Derivative Criteria for European Structured Finance Transactions" methodology.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.
The sources of data and information used for this rating include investor reports provided by France Titrisation and loan-level data provided by the European DataWarehouse GmbH.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purpose of providing this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 1 March 2018, when DBRS confirmed the rating of the Class A notes.
The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.
Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):
-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 5.1% and 19.6%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to fall to AA (high) (sf).
Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
For further information on DBRS historic default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see:
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 8 March 2017
DBRS Ratings Limited
20 Fenchurch Street
Registered in England and Wales: No. 7139960.
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at email@example.com.