DBRS Ratings Limited (DBRS) confirmed the ratings of the Notes issued by FCT Ginkgo Compartment Debt Conso 2015-1 (the Issuer) as follows:
-- Class A Asset-Backed Fixed-Rate Notes (Class A Notes) confirmed at A (sf)
-- Class B Asset-Backed Fixed-Rate Notes (Class B Notes) confirmed at BBB (sf)
The ratings of the Class A and Class B Notes (the Notes) address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of August 2019.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the receivables.
-- Current available credit enhancement to the Notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occurred.
The Issuer is a securitisation of French debt consolidation loans originated and serviced by Crédit Agricole Consumer Finance (CACF). The transaction is currently in its three-year revolving period, which is scheduled to end in September 2021. There are portfolio criteria in place to mitigate potential portfolio deterioration, all of which have been met.
As of the August 2019 payment date, two- to three-month arrears represented 0.4% of the outstanding portfolio balance, down from 0.8% in August 2018. The 90+ delinquency ratio was 0.5%, down from 1.3% in August 2018. Cumulative non-performing loans were 4.0%.
DBRS conducted an analysis of the pool of receivables and has maintained its base case PD and LGD assumptions at 16.3% and 67.4%, respectively. The assumptions continue to be based on the worst-case portfolio composition given the revolving period.
CREDIT ENHANCEMENT AND RESERVES
As of the August 2019 payment date, credit enhancement to the Class A Notes was 29.0% and credit enhancement to the Class B Notes was 20.5%, both stable since the 2018 restructure because of the revolving period. Credit enhancement is provided by subordination of the junior notes.
The transaction benefits from a non-amortising General Reserve, funded to the target level of EUR 10 million. The General Reserve Account is split into two sub-ledgers, the Class A Reserve Ledger (90%) and the Class B Reserve Ledger (10%). Amounts standing to the credit of the Class A Reserve Ledger can be utilised to cover senior fees and Class A interest only, while amounts standing to the credit of the Class B Reserve Ledger can be utilised to cover senior fees, Class A and B interest and the Class A Principal Deficiency Ledger.
The transaction also benefits from a Commingling Reserve currently funded to its target level of EUR 24.1 million.
Credit Agricole Consumer Finance acts as the account bank for the transaction. Based on the DBRS private rating of Credit Agricole Consumer Finance, 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.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings 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 Servicing Agreement following an amendment to the servicing fees in June 2019. A review of the other 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 “Global Methodology for Rating Sovereign Governments” at: https://ww.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings 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 supplied with 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 these ratings 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 25 September 2018, when DBRS downgraded its rating of the Class A Notes to A (sf) from AA (low) (sf) and downgraded its rating of the Class B Notes to BBB (sf) from A (sf), following a structural amendment to the transaction.
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 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 16.3% and 67.4%, 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 BBB (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 BBB (low) (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 BB (low) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)
Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in LGD, expected rating of B (sf)
-- 25% increase in PD, expected rating of BB (sf)
-- 50% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (sf)
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: 8 July 2015
DBRS Ratings Limited
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Registered and incorporated under the laws of England and Wales: Company 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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Operational Risk Assessment for European Structured Finance Originators
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.