DBRS Assigns Provisional Rating to FCT Crédit Agricole Habitat 2017

DBRS Ratings Limited (DBRS) has today assigned a provisional rating of [AAA (sf)] to the Class A notes to be issued by FCT Crédit Agricole Habitat 2017 (the Issuer). The Issuer is expected to be established as a Fonds Commun de Titrisation (FCT), governed by French regulations. At the FCT Issue Date, the Issuer will use the proceeds of the Class A notes, Class B notes and Residual Units to purchase a portfolio of home loans from the Sellers. The FCT will have no revolving period; therefore, it will start to amortize from the first interest payment date. The envisaged Final Legal Maturity Date of the transaction is in [June 2052], but will subject to redemption events and asset reassignments.

Home loans in the portfolio will be guaranteed by either a mortgage over the relevant property, a CAMCA Assurance S.A. guarantee or a Crédit Logement guarantee.

The Sellers of the home loans will be the 39 regional banks of Caisses Régionales de Crédit Agricole. Each of the Sellers will be the Servicer of its respective portfolio. Each Seller will also contribute an amount to fund the Liquidity Reserve Account equal to the Contribution Ratio, calculated as a percentage of the total home loans in the portfolio at the Issue Date, multiplied by the Liquidity Reserve Required Deposit.

The Class A notes will benefit from [12%] credit enhancement, which will consist of subordination of the Class B notes. Additionally, the Class A notes will benefit from a non-amortising Liquidity Reserve, which will be funded at the Issue Date in amount equal to [1%] of the initial amount of the Class A and Class B notes and will be available to cover senior expenses and fees, Swap Net Cash Flow and Class A interest.

Additionally, the transaction will also benefit from a Cost Reserve to be funded to EUR [250,000] at closing, which the Issuer will use to pay Issuer Expenses due to the Account Bank.

Up to and including the [March 2022] payment date, the Class A notes will receive a floating coupon rate of three-month EURIBOR + [%]. Following the [March 2022] payment date, the Class A notes will step up to pay a coupon equal to three-month EURIBOR + [%]. The Class B notes will bear a fixed coupon during the life of the transaction. Both the Class A and Class B notes will pay interest on a quarterly basis.

As of [30 November] 2016, the provisional portfolio consists of [14,539] loans, each secured by a unique Borrower and a unique Property. The total balance of the portfolio amounts to EUR [1.5 billion]. The average loan per borrower is EUR [103,377]. The weighted-average (WA) seasoning of the portfolio is [4.01] years with a WA maturity of [15.83] years. The WA loan-to-value of the portfolio is [74.97%]. There are no buy-to-let loans in the portfolio. [90.91%] of the loans are fixed-for-life loans and there are no interest-only loans. [20.4%] of the borrowers are self-employed. DBRS was not provided with debt-to-income (DTI) information. The Eligibility Criteria, however, has restricted the maximum DTI to 33% when the home loan has been granted.

Crédit Agricole S.A. (CASA) is the Account Bank and the Specially Dedicated Account Bank for the transaction. CASA’s Critical Obligation Rating is currently AA, which complies with the threshold for the Account Bank, given the provisional rating assigned to the Class A notes. Additionally, the transaction documents include downgrade trigger language should CASA be downgraded below the threshold. The transaction documents also included a Commingling Trigger Event, which references CASA’s rating if the Sellers are part of the Crédit Agricole Group.

The DBRS rating addresses timely interest on the Class A notes and ultimately payment of principal by the Legal Final Maturity Date in [June 2052]. DBRS based the ratings primarily on:
-- The transaction capital structure, form and sufficiency of available credit enhancement and liquidity provisions.
-- The static portfolio characteristic demonstrated by the provisional pool data. The portfolio was used with the European RMBS Credit Model to estimate the expected probability of default (PD), loss given default (LGD) and expected loss based on different guarantee providers.
-- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as downgrade and replacement language in the transaction documents and the Liquidity Reserve Account.
-- The transaction’s ability to withstand stressed cash flow assumptions and repay investors in accordance with the Terms and Conditions of the notes.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction was modeled in Intex and the default rates at which the rated notes did not return all specified cash flows in a timely manner.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional 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 data and information used for this rating include Crédit Agricole S.A. and their representatives.

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

DBRS was supplied with one or more third-party assessments. DBRS applied additional cash flow stresses in its rating analysis.

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

DBRS 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 rating on this financial instrument.

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, the PD and LGD at the AAA (sf) stress scenario of [22.49%] and [47.39%], respectively, were stressed assuming a 25% and 50% increase on both the PD and LGD.

DBRS concludes the following impact on the Class A notes:
-- 25% increase of the PD, ceteris paribus would not lead to a downgrade.
-- 50% increase of the PD, ceteris paribus would lead to a downgrade to [AA (high) (sf)].
-- 25% increase of the LGD, ceteris paribus would not lead to a downgrade.
-- 50% increase of the LGD, ceteris paribus would lead to a downgrade to [AA (high) (sf)].
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to [AA (high) (sf)].
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to [AA (sf)].
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to [AA (high) (sf)].
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to [AA (sf)].

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: Rehanna Sameja, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 26 January 2017

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