DBRS Ratings Limited (DBRS) assigned a AAA (sf) rating to the Class A notes issued by FCT Crédit Agricole Habitat 2019 (the Issuer), a securitisation of French home loans originated by the 39 Caisses Régionales de Crédit Agricole Mutuel (the Sellers, CRCAM or Regional Banks) and Credit Lyonnais (LCL). The Issuer is established as a Fonds Commun de Titrisation (FCT), governed by French regulations. At the Issue Date (23 May 2019), the Issuer used the proceeds of the Class A notes, Class B notes and Residual Units to purchase a portfolio of home loans from the Sellers. The transaction will have a four-year revolving period and hence is expected to start amortising from December 2023.
Home loans in the portfolio are guaranteed by either a mortgage over the relevant property, a CAMCA Assurance S.A. guarantee or a Crédit Logement guarantee.
The Sellers of the home loans are the 39 Regional Banks of Crédit Agricole and LCL. All of the Sellers are also the Servicers of their home loans sold to the Issuer. Each Seller will contribute an amount to fund the Liquidity Reserve equal to its Contribution Ratio multiplied by the Liquidity Reserve deposit.
The Class A notes benefit from 14.5% credit enhancement, which consists of subordination of the Class B notes. Additionally, the Class A notes benefit from a non-amortising Liquidity Reserve, which is funded at the Issue Date in amount equal to EUR 52.5 million and is available to cover senior expenses or fees and Class A interest. Additionally, the transaction benefits from a Cost Reserve funded to EUR 1,000,000 at closing, which the Issuer will use to pay Issuer Expenses due to the Account Bank.
Up to the December 2023 payment date, the Class A notes will pay a fixed coupon rate of 0.3%. From December 2023 payment date, the Class A notes will step up to pay a coupon equal to three-month Euribor + 0.6%, floored at 0%, with the rated interest capped at 0.5% and with excess consideration above such cap paid junior to the repayment of the Class A notes principal amount. The Class B notes will bear a fixed coupon during the life of the transaction of 0.45%. Both the Class A and Class B notes pay interest on a quarterly basis.
As of 28 February 2019, the portfolio consisted of 159,745 loans granted to 147,070 borrowers. The total balance of the portfolio amounted to EUR 17.3 billion. The average loan per borrower was EUR 108,319. The weighted-average (WA) seasoning of the portfolio was 3.5 years with a WA remaining term of 17.6 years. The WA loan-to-value of the portfolio was 83.6%. There were 17.0% buy-to-let loans in the portfolio but no interest-only loans were included in the pool. The vast majority (98.7%, in terms of outstanding loan balance) of the loans were fixed-for-life loans. Approximately 15.5% of the borrowers are self-employed.
The Eligibility Criteria permit up to 60% for home loans guaranteed by CAMCA Assurance S.A. and a minimum share of 20% for home loans guaranteed by Crédit Logement.
Crédit Agricole S.A. (CASA) is the Account Bank and the Specially Dedicated Account Bank for the transaction. CASA’s Long-Term Issuer and Senior Debt Ratings are both currently AA (low) with Stable trends, which complies with the threshold for the Account Bank, given the rating assigned to the Class A notes. Additionally, the transaction documents include downgrade trigger language should CASA be downgraded below the threshold. The transaction documents also include a Commingling Reserve Trigger Event, which references CASA’s rating if the Servicers are part of the Crédit Agricole Group.
The rating addresses the timely payment of interest and the Issuer’s obligation to repay principal on the Class A Notes by the Legal Final Maturity Date in April 2054. DBRS does not rate the Class B notes.
DBRS based its rating primarily on the following analytical considerations:
-- The transaction capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- Worst-case portfolio based on the portfolio characteristic thresholds defined in the Global Portfolio Triggers. The worst-case portfolio was used with the European RMBS Credit Model to estimate the probability of default (PD), loss given default (LGD) and expected loss for each rating scenario.
-- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as downgrade and replacement language in the transaction documents and the Liquidity Reserve Account.
-- The transaction’s ability to withstand stressed cash flow assumptions and repay investors in accordance with the Terms and Conditions of the notes.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”.
An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis is based on the worst-case replenishment criteria set forth in the transaction legal documents.
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: https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for this rating include historical performance (default, recovery and prepayment data) and loan-level data provided by CASA and its representatives.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
DBRS was supplied with one or more third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes 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.
This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
In respect of the Class A Notes, the PD and LGD at the AAA (sf) stress scenario of 27.18% and 48.18%, respectively, were stressed assuming a 25% and 50% increase on both the PD and LGD.
DBRS concludes the following impact on the Class A Notes:
-- 25% increase of the PD, ceteris paribus would not lead to a rating change
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to AA (high) (sf)
-- 25% increase of the LGD, ceteris paribus would not lead to a rating change
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade to AA (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (high) (sf)
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (sf)
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to AA (sf)
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to AA (low) (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS are subject to EU and US regulations only.
Lead Analyst: Alessandra Maggiora, Assistant Vice President
Rating Committee Chair: Gareth Levington, Managing Director, Credit Standards
Initial Rating Date: 24 May 2019
DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Derivative Criteria for European Structured Finance Transactions
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
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 firstname.lastname@example.org.