DBRS Confirms Rating of Red & Black Consumer France 2013

DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating of the Class A notes issued by Red & Black Consumer France 2013 (the Issuer).

The rating of the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of August payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the receivables.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AAA (sf) rating level.
-- No revolving termination events have occurred.

Red & Black Consumer France 2013 is a securitisation of French unsecured consumer loan receivables originated by Sogéfinancement, a French subsidiary of Société Générale and Franfinance. The transaction closed in October 2013 and had an initial three-year revolving period that was extended in September 2016 for a further three years to October 2019. During the revolving period, the Issuer can purchase new receivables subject to certain conditions being met. The Class A notes will start to amortise at the January 2020 payment date.

PORTFOLIO PERFORMANCE
As of August 2019, loans that were two- to three-months in arrears represented 0.4% of the outstanding portfolio balance, down from 0.3% in August 2018. The 90+ delinquency ratio has remained stable at 0.4% since August 2018. The cumulative default ratio was 1.8%.

PORTFOLIO ASSUMPTIONS
DBRS conducted an analysis of the collateral pool and assumed a base case cumulative net loss assumption of 4.9%. The loss assumption is based on an assessment of the worst-case portfolio composition given that the transaction is currently in its revolving period.

CREDIT ENHANCEMENT
As of the August 2019 payment date, credit enhancement to the Class A notes was 30.0% and has been stable since the DBRS initial rating because of the transaction’s revolving period. Credit enhancement to the Class A notes consists of subordination of the Class B notes.

The transaction benefits from a general reserve currently funded to the target level of EUR 21.4 million that is available to cover senior fees and Class A interest.

Société Générale, S.A. acts as the account bank for the transaction. Based on the account bank reference rating of Société Générale, S.A. at AA (low), which is one notch below the DBRS Long-Term Critical Obligations Rating of AA, 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.

The transaction structure was analysed in Intex DealMaker.

Notes:
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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

DBRS carried out a review of the Master Receivables Sale and Purchase Agreement, Master Definitions Agreement and Issuer Regulations Agreement following an amendment to the Portfolio Criteria on 14 January 2019. A review of the other transaction legal documents was not conducted as these 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 EuroTitrisation 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 not 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 11 September 2018, when DBRS confirmed its rating of the Class A notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.

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 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 pool of loans for the Issuer are 7.3% and 66.6%, 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 fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to AA (high) (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 A (high) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (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 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: 8 October 2013

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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 info@dbrs.com.