DBRS Ratings Limited (DBRS Morningstar) confirmed its rating on the Obligation A bonds (the Notes) issued by FCT Oneycord, Compartiment Oneycord 1 (the Issuer) at A (high) (sf).
The rating on the Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date, on 31 December 2042.
The confirmation follows an annual review of the transaction and 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, as of the May 2020 payment date.
-- Current available credit enhancement to the Notes to cover the expected losses at the A (high) (sf) rating level.
-- No revolving termination events have occurred.
The transaction is a securitisation of credit card receivables and revolving credit lines, originated and serviced by Oney Bank S.A. (Oney Bank) in France. Oney Bank is a captive finance company owned by the French retail group Auchan (49.9%) and the banking group BCPE (50.1%). The transaction is in its revolving period, scheduled to end on the June 2023 payment date with an optional extension to the June 2027 payment date. The last amendment of the transaction occurred in May 2019.
PORTFOLIO PERFORMANCE, ASSUMPTIONS AND KEY DRIVERS
As of the May 2020 payment date, two- to three-month arrears represented 0.8% of the outstanding portfolio balance, down from 0.9% a year ago and the 90+ delinquency ratio was at 1.6%, slightly up from 1.5% a year ago. As of the May 2020 payment date, the cumulative default ratio was 1.7%.
As of the May 2020 payment date, the MPPR was 11.4%, the annualised charge-off rate was 0.1% and the annualised yield rate was 12.2%; all have exhibited stable trends since September 2015, when the last major transaction restructure took place. The proportion of Special Drawings products, which carry a fixed interest rate, has been trending slightly upwards and was at 15.9% of the portfolio outstanding balance, up from 15.6% a year ago.
The transaction will begin to amortise if certain triggers are breached. As of May 2020, 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%.
Given that the portfolio observed performance remains within DBRS Morningstar’s expectations, DBRS Morningstar maintained its base case MPPR, charge-off, and yield rates at 7.6%, 9.8%, and 14.0%, respectively. These assumptions had been updated at the time of the amendment of May 2019.
The Notes 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 Notes. 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 Morningstar private rating of Natixis S.A., the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
DBRS Morningstar analysed the transaction structure in DBRS Morningstar’s proprietary Excel-based cash flow engine.
The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may arise in the coming months for many ABS transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. On 16 April 2020, the DBRS Morningstar Sovereign group published its outlook on the impact to key economic indicators for the 2020-22 time frame. For details see the following commentaries: https://www.dbrsmorningstar.com/research/359679/global-macroeconomic-scenarios-implications-for-credit-ratings and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.
For more information on DBRS Morningstar considerations for European ABS transactions and Coronavirus Disease (COVID-19), please see the following commentary: https://www.dbrsmorningstar.com/research/360734.
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology” (22 April 2020). DBRS Morningstar 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 at: http://www.dbrsmorningstar.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://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for this rating include investor reports provided by Eurotitrisation.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purpose of providing this rating to be of satisfactory quality.
DBRS Morningstar 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 28 May 2019, when DBRS Morningstar upgraded the rating of the Notes to A (high) (sf) from A (sf).
The lead analyst responsibilities for this transaction have been transferred to Natalia Coman.
Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies is available at www.dbrsmorningstar.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 Notes under the six stressed scenarios are: A (low) (sf), BBB (low) (sf), BBB (high) (sf), BB (sf), A (low) (sf) and BB (sf), respectively.
For further information on DBRS Morningstar 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 U.S. regulations only.
Lead Analyst: Natalia Coman, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 15 September 2015
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.
-- Master European Structured Finance Surveillance Methodology (22 April 2020) https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations (13 January 2020) https://www.dbrsmorningstar.com/research/355533/rating-european-consumer-and-commercial-asset-backed-securitisations
-- Rating European Structured Finance Transactions Methodology (28 February 2020),
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019) https://www.dbrsmorningstar.com/research/351557/interest-rate-stresses-for-european-structured-finance-transactions
-- Legal Criteria for European Structured Finance Transactions (11 September 2019) https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020) https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers
-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020) https://www.dbrsmorningstar.com/research/357430/operational-risk-assessment-for-european-structured-finance-originators
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrsmorningstar.com/research/278375.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at firstname.lastname@example.org.