DBRS Ratings GmbH (DBRS Morningstar) assigned a AAA rating to the EMTN Series 2023-7 (Series 2023-7) notes issued under the CAFFIL SCF (the Issuer) Public Sector Covered Bonds Programme (the programme). Series 2023-7 is a EUR 10 million fixed-rate bond that pays a coupon of 3.901% and matures on 5 May 2053.
At the same time, DBRS Morningstar discontinued its ratings on three series (S 1144-0, S 859-0, and S 1145-0) that matured on 5 May 2023.
All covered bonds (CBs) issued under the programme rank pari passu with each other and DBRS Morningstar currently rates them AAA.
The ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of AA (high), which is the Long-Term Issuer Rating of SFIL SA (SFIL). SFIL is the Reference Entity for the programme.
-- A Legal and Structuring Framework (LSF) Assessment of “Very Strong” associated with the programme, although the LSF Assessment does not currently affect the ratings in a material way.
-- A Cover Pool Credit Assessment (CPCA) of A (low) that can currently be achieved.
-- An LSF-Implied Likelihood (LSF-L) of AAA that can currently be achieved.
-- A possible two-notch uplift for high recovery prospects, although the level of recoveries does not currently affect the ratings in a material way.
-- The level of overcollateralisation (OC) of 10.9% to which DBRS Morningstar gives credit, which is the minimum level observed in the past 12 months, adjusted by a scaling factor of 0.85.
-- The sovereign rating on the Republic of France, rated AA (high) with a Stable trend by DBRS Morningstar, as of the date of this press release.
DBRS Morningstar analysed the transaction using its European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses, and market value spreads to calculate liquidation values on the cover pool (CP).
To assign ratings to new issuances, DBRS Morningstar uses the following stressed assumptions: a CPCA of BB, because BB is the lowest-tested stress level currently compatible with the AAA CB rating, and an LSF-L of AA (high) compatible with this level of CPCA.
Everything else equal, provided that a CPCA of A (low) is currently achievable, a five-notch downgrade of the CBAP would lead to a three-notch downgrade of the LSF-L to AA (low) and a one-notch downgrade on the CB ratings. Based on a CPCA of BB (i.e., the level tested to assign ratings to new issuances), a two-notch downgrade of the CBAP to AA (low) would lead to a two-notch downgrade of the LSF-L to AA (low), resulting in a one-notch downgrade on the CB ratings.
In addition, all else unchanged, the CB ratings would be downgraded if any of the following occurred:
(1) the sovereign rating of the Republic of France was downgraded below AA; (2) the relative amortisation profile of the CBs and CP moved adversely; (3) volatility in the financial markets caused the currently estimated market value spreads to increase; or (4) the composition of the CP, the level of OC to which DBRS Morningstar gives credit, interest rate stresses, or foreign currency exposure changed adversely to a degree that a one-notch uplift for good recovery prospects could no longer be granted.
For further information on the programme, please refer to the rating report at www.dbrsmorningstar.com.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Credit rating actions on SFIL are likely to have an impact on this credit rating.
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “Rating and Monitoring Covered Bonds” (22 April 2022), https://www.dbrsmorningstar.com/research/395642/rating-and-monitoring-covered-bonds.
Other methodologies referenced in this transaction are listed at the end of this press release.
In DBRS Morningstar’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS Morningstar focused on the cash flow analysis.
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/401817/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 these ratings include investor reports provided by the Issuer.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial ratings, DBRS Morningstar was not 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 these ratings 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.
This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.
The last rating action on this transaction took place on 3 May 2023, when DBRS Morningstar assigned a AAA rating to the EMTN Series 2023-6 SOCIAL notes.
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.
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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.
These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.
Lead Analyst: Tomás Rodríguez-Vigil, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 10 September 2018
DBRS Ratings GmbH, Sucursal en España
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.
-- Rating and Monitoring Covered Bonds (22 April 2022),
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (22 April 2022),
-- Modelling Assumptions for Portfolios of Public Sector Exposures (26 July 2022) and Public Sector Model v 0.2.1, https://www.dbrsmorningstar.com/research/400385/modelling-assumptions-for-portfolios-of-public-sector-exposures.
-- Global Methodology for Rating Banks and Banking Organisations (23 June 2022),
-- Legal Criteria for European Structured Finance Transactions (22 July 2022),
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021),
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022),
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022),
-- Global Methodology for Rating Sovereign Governments (29 August 2022),
-- Currency Stresses for Global Structured Finance Transactions (1 February 2023),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),
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 email@example.com.