DBRS Morningstar Confirms Rating of FCT Crédit Agricole Habitat 2019

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) rating of the Class A notes issued by FCT Crédit Agricole Habitat 2019 (the Issuer).

The rating of the Class A notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in June 2054.

The rating action follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults, and losses.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occurred to date.

The transaction is a securitisation of French home loans originated by the 39 Caisses Régionales de Crédit Agricole Mutuel and Credit Lyonnais. The transaction is currently in its revolving period, which is scheduled to end in December 2023.

The home loans in the portfolio are either secured by the relevant properties or guaranteed by CAMCA Assurance S.A. or Crédit Logement, SA (rated AA (low) with a Stable trend by DBRS Morningstar).

PORTFOLIO PERFORMANCE
As of the March 2022 payment date, loans two to three months in arrears represented 0.01% of the outstanding portfolio balance, unchanged from March 2021. The 90+ delinquency ratio was 0.03%, up from 0.01% in the same period and the cumulative default ratio remained at 0.1%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and maintained its base case PD and LGD assumptions at 4.5% and 21.4%, respectively, based on the potential migration of the current portfolio to the limits prescribed by the replenishment criteria.

CREDIT ENHANCEMENT
As of the March 2022 payment date, credit enhancement to the Class A notes was 14.5%, stable since the DBRS Morningstar initial rating due to the transaction revolving period, which is scheduled to end in December 2023. Credit enhancement consists of subordination of the Class B notes.

The transaction benefits from a nonamortising liquidity reserve funded to 0.35% of the initial balance of the Class A and Class B notes. The liquidity reserve is available to cover senior expenses and fees, and interest on the Class A notes and is currently at its target balance of EUR 52.5 million.

Additionally, the transaction benefits from a EUR 1.0 million cost reserve funded at closing, which the Issuer will use to pay its expenses due to the account bank.

Credit Agricole Corporate and Investment Bank (CA-CIB) acts as the account bank for the transaction. Based on DBRS Morningstar’s account bank reference rating on CA-CIB, 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 Class A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/396929.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology” (8 February 2022).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

DBRS Morningstar 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 consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 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 purposes 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 20 May 2021, when DBRS Morningstar confirmed its AAA (sf) rating of the Class A notes.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar 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 4.5% and 21.4%, 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 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 (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 AA (high) (sf) -- 50% increase in LGD, expected rating of AA (high) (sf) -- 25% increase in PD, expected rating of AA (high) (sf) -- 50% increase in PD, expected rating of AA (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 (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 Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 24 May 2019

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Geschäftsführer: Detlef Scholz
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (8 February 2022), https://www.dbrsmorningstar.com/research/392000/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021), https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021), https://www.dbrsmorningstar.com/research/384512/operational-risk-assessment-for-european-structured-finance-originators.
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (29 November 2021) and EU RMBS Credit Model (version 1.0.0.0), https://www.dbrsmorningstar.com/research/388848/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021), https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),
https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social and-governance-risk-factors-in-credit-ratings.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.