DBRS Ratings Limited (DBRS) upgraded its rating of the Obligation A bonds issued by FCT Oneycord, Compartiment Oneycord 1 (the Issuer) to A (high) (sf) from A (sf).
The rating of the Obligation A bonds addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The upgrade is based on the following analytical considerations:
-- Portfolio performance and assumptions, in terms of charge-off rates, monthly principal payment rates (MPPRs) and portfolio yield rates.
-- Current available credit enhancement to the Obligation A notes to cover the expected losses at the A (high) (sf) rating level.
-- No revolving termination events have occured.
-- A structural amendment (the Amendment) to the transaction executed on 28 May 2019.
The Issuer is a securitisation of credit card receivables and revolving credit lines, originated and serviced by Oney Bank S.A. in France.
The Amendment to the transaction executed on 28 May 2019 included the following:
-- An extension of the revolving period to June 2023, which may be further extended to June 2027 with notification to DBRS;
-- Implementation of a provision for partial amortisation of the bonds if the portfolio is not sufficiently replenished during the revolving period;
-- Reduction in the coupon on the Obligation B bonds to 1.0% from 2.5%.
PORTFOLIO PERFORMANCE AND ASSUMPTIONS
DBRS conducted an analysis of updated historical performance data received from the Arranger (Natixis, S.A.) to derive updated base case MPPRs, portfolio yield rates and charge-off rate assumptions. DBRS decreased it’s base case MPPR assumption to 7.6%, from 7.8%, and decreased its base case yield rate to 14.0% from 14.2%. DBRS also decreased its charge-off rate assumption to 9.8% from 10.4%.
The transaction will begin to amortise if certain triggers are breached. As of May 2019, the monthly default rate was 0.2%, which is below the amortisation trigger level of 1.1%. The monthly portfolio yield was 1.1%, which is above the amortisation trigger level of 0.9%.
The Obligation A bonds benefit from minimum credit enhancement of 22.3%, which consists of subordination of the Obligation B bonds and the Reserve Fund.
The Reserve Fund is funded to 3% of the Minimum Receivables Balance and is currently at its target level of EUR 20.7 million. The Reserve Fund covers senior fees and interest on the Obligation A bonds. In addition, 1.5% is available to cover other items in the waterfall.
Natixis S.A. acts as the account bank for the transaction. Based on the DBRS private rating of Natixis S.A., 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 Obligation A bonds, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in DBRS’s proprietary Excel-based cash flow engine.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “Rating European Consumer and Commercial Asset-Backed Securities”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
DBRS has conducted a review of the transaction legal documents provided in the context of the aforementioned amendment. The other transaction legal documents have remained unchanged since the most recent rating action and as such, a review has not been conducted.
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 performance data provided by the Arranger and investor reports provided by EuroTitrisation.
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 9 October 2018, when DBRS confirmed the rating of the Obligation A bonds at A (sf).
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):
-- Base Case MPPR: 7.6%
-- Base Case Yield Rate: 14.0%
-- Base Case Charge-Off Rate: 9.8%
-- Scenario 1: 25% increase in charge-off, 25% decrease in yield
-- Scenario 2: 50% increase in charge-off, 50% decrease in yield
-- Scenario 3: 25% increase in charge-off, 25% decrease in MPPR
-- Scenario 4: 50% increase in charge-off, 50% decrease in MPPR
-- Scenario 5: 25% decrease in yield, 25% decrease in MPPR
-- Scenario 6: 50% decrease in yield, 50% decrease in MPPR
The expected ratings for the Obligation A bonds under the six stressed scenarios are: A (low) (sf), BBB (low) (sf), A (low) (sf), BB (sf), BBB (high) (sf), BB (sf), respectively.
For further information on DBRS historical 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: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 15 September 2015
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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses 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.