DBRS Confirms Red & Black Consumer France 2013

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

The confirmation of the rating for the Class A notes is based upon the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of level of delinquencies and defaults, as of 20 August 2015 payment date.
-- Updated default, recovery and loss assumptions on the remaining balance of the collateral portfolio.
-- Current available credit enhancement to the Class A notes to cover expected losses assumed in line with a AAA (sf) rating level.

Red & Black Consumer France 2013 is a securitisation of a pool of unsecured loans receivables related to personal and student loans originated in France by Sogéfinancement, a French subsidiary of Société Générale and Franfinance. The transaction closed in October 2013 and has a three-year revolving period scheduled to end in October 2016 which can be extended for a further three years.

As of the 20 August 2015 payment date, the 90+ delinquency ratio was 0.37%. The cumulative gross default ratio was at 0.97% of the original collateral balance.

Credit enhancement to the Class A notes stems from the subordination of the Class B notes. As the transaction is still in the revolving period, credit enhancement to the Class A notes remains equal to 30.00%.

The transaction benefits also from a Cash Reserve Fund available to cover any shortfall in senior waterfall items and/or Class A interest payments. Ultimately, the residual balance of the reserve may be used to redeem the notes. The Cash Reserve Fund is currently EUR 26.7 million, 0.75% of the outstanding notes balance.

HSBC France holds the Account Bank for the transaction. The DBRS private rating of HSBC France complies with the threshold for the Account Bank given the rating assigned to the Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

An asset and a cash flow analysis were both conducted. However, due to the inclusion of a revolving period in the transaction, and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include servicer reports provided by EuroTitrisation (the FCT Management Company). DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. DBRS does not rely upon third-party due diligence in order to conduct its analysis; DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 29 May 2015, when DBRS confirmed the Class A rating at AAA (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- DBRS expected a Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. 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 receivables are 6.84% and 73.53%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increase by 50% the rating for the Class A notes would be expected to decrease at AA (high) (sf), all else being equal. If the PD increases by 50% the rating for the Class A notes would be expected to decrease to AA (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A notes would be expected to decrease to A (sf), all else being equal.

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 (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration (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 regulations only.

Initial Lead Analyst: Bruno Franco
Initial Rating Date: 8 October 2013
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Diana Turner

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The rating methodologies and criteria 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.
-- Unified Interest Rate Model for European Securitisations.
-- Rating European Consumer and Commercial Asset-Backed Securitisations.