DBRS Confirms Ratings on FCT Opera 2014 Class A Notes Following Amendment

DBRS Ratings Limited (DBRS) has confirmed the AAA (sf) ratings on the Class A Notes issued by FCT Opera 2014 (Issuer). The ratings assigned to the Class A Notes address timely payment of interest and ultimate payment of principal. The Issuer is a securitisation fund of home loans originated by BNP Paribas (BNPP or Seller) originally established on 12 November 2014. The transaction is managed by France Titrisation (the Management Company). The portfolio is serviced by BNPP.

The rating action follows the amendment to the transaction on 22 November 2016 which involved increasing the existing Class A Notes in an amount equal to EUR 65,135,748 to the increasing the original class factor, issuing additional Class A Notes in the amount of EUR 4,283,400,000 and issuing additional unrated Class B Notes in the amount of EUR 2,447,400,000. The Issuer used the proceeds of the nominal increase of the Class A Notes and newly issued notes to purchase a portfolio of additional home loans and their ancillary rights. Following the issuance of the additional notes, the outstanding balance of the Class A Notes will be EUR 5,397,300,000 and the outstanding balance of the Class B Notes will be EUR 2,658,500,000.

In addition, certain structural features have been added or amended including a Second Revolving Period, during which time the Issuer may purchase further home loans and their ancillary rights; amendments to the eligibility criteria for the purchase of additional home loans and their anillary rights; and an increase to the amounts standing in the Reserve Fund and Commingling Reserve Fund given the increase in the outstanding balance of notes.

Credit enhancement to the Rated Notes consists of 33.0% subordination provided by Class B Notes and the Reserve Fund equal to 5.0% of the total balance of the Class A Notes and Class B Notes. The Reserve Fund will be available to pay senior fees and expenses as well as interest due on the Class A Notes and Class B Notes during the Normal Redemption Period. During the Accelerated Redemption Period, the Reserve Fund will be partially available to provide credit support to the Rated Notes.

As of the date of the amendment date (22 November 2016), the updated portfolio of home loans is equal to EUR 8.000 billion. The weighted-average seasoning of the portfolio is equal to 4.0 years, with a remaining weighted-average term of 12.8 years. The weighted-average current loan-to-value (CLTV) is calculated at 73.3% with 47.6% having a CLTV greater than 80%. 10.5% of the portfolio are interest-only loans and 44.5% are buy-to-let (BTL). The portfolio geographic concentration is primarily in Ile-de-France (46.7%), Provence-Alpes-Côte-d'Azur (8.64%) and Rhône-Alpes (7.8%).

The Second Revolving Period will allow the Issuer to purchase additional home loans from the Seller until 25 November 2018. The amendment includes updated conditions for further purchases of home loans which consists of delinquency and default triggers as well as eligibility criteria for additional home loans. The DBRS credit analysis assumes principal receipts received during the revolving period will be reinvested in additional home loans which have the highest risk characteristics to assess the potential credit migration of the portfolio during the revolving period. The updated portfolio was used with the EU RMBS Credit Model to estimate the expected portfolio probability of default (PD) for each rating scenario.

The notes all pay a fixed rate of interest. As of the 2016 Issue Date, the portfolio consists of 100% fixed-rate loans. However, during the Seocnd Revolving Period the Issuer eligibility criteria allows for the Issuer to purchase up to 25% floating-rate loans. The Issuer has entered into an interest rate swap agreement with BNPP to hedge the interest rate mismatch between the potential assets and liabilities. The senior unsecured rating of BNPP is currently AA (low) with a Critical Obligations Rating of AA (high). The rating of BNPP and language in the downgrade replacement triggers in the interest rate swap agreement are consistent with the DBRS Derivative Criteria for European Structured Finance Transactions given the ratings of the Rated Notes.

BNP Paribas Securities Services is the Account Bank for the transaction. The DBRS private rating of BNP Paribas Securities Services are least equal to the Minimum Institution Rating, given the ratings assigned to the Rated Notes, as described in the DBRS Legal Criteria for European Structured Finance Transacitons.

The ratings are based upon a review of DBRS of the following analytical considerations:
-- Transaction capital structure and sufficiency of available credit enahancement.
-- Credit quality of the portfolio. DBRS calcluated a probability of default (PD), loss given default (LGD) and expected loss (EL) based on the current portfolio and assuming reinvestment of principal proceeds during the Second Revolving Period into a worst case portfolio given the eligibility criteria.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay the Rated Notes according to the terms and conditions of the documents. The transaction cash flows were modelled using PDR and LGD outputs provided by the European RMBS Credit Model. Transaciton cash flows were modelled using Intex DealMaker.
-- The legal structure and presence of legal opinions addressing assignment of the assets to the Issuer is consistent with DBRS’s Legal Criteria for Eureopan Structured Finance methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdiciotnal Addenda.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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 DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include BNPP.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was supplied with third party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

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 4 October 2016.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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”):

In respect of the Class A Notes, a PD rate of 24.96% and LGD rate of 40.13%, corresponding to a AAA (sf) rating scenario, were stressed assuming a 25% and 50% increase to the PD and LGD. All else equal, the Class A Notes would be expected to maintain the AAA (sf) rating for hypothetical increases of each of the PD and LGD stresses, individually and together.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“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.

Lead Analyst: Keith Gorman, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Senior Vice President
Initial Rating Date: 4 November 2014

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, London EC3M 3BY United Kingdom
Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Derivative Criteria for European Structured Finance Transactions (3 October 2016);
-- Legal Criteria for European Structured Finance Transactions (14 September 2016);
-- Operational Risk Assessment for European Structured Finance Servicers (14 October 2016);
-- Operational Risk Assessment for European Structured Finance Originators (14 October 2016);
-- Unified Interest Rate Model for European Securitisations (2 November 2016).
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (2 November 2016).

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