DBRS Confirms Rating on Red & Black Consumer France 2013

DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A notes issued by Red & Black Consumer France 2013 (the Issuer):

The rating action on the Class A notes follows an annual review of the transaction and is based on the following analytical considerations as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of June 2017.
-- No Amortisation Events have occurred;
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AAA (sf) rating level.

The Issuer is a securitisation of French unsecured consumer loan receivables originated and serviced by Sogéfinancement, a French subsidiary of Société Générale and Franfinance.

PORTFOLIO PERFORMANCE
As of June 2017, the 90+ delinquency ratio was at 0.29%. The cumulative default ratio was 1.51%.

REVOLVING PERIOD
The transaction is currently in its revolving period, scheduled to terminate in October 2019, during which the Issuer has the option to purchase new receivables subject to certain conditions and limitations. The revolving period will end prematurely upon the occurrence of an Amortisation Event.

PORTFOLIO ASSUMPTIONS
DBRS has conducted an analysis of the remaining collateral pool and maintained its cumulative net loss assumption at 5.11%. The loss assumption is based on an assessment of the “worst-case” portfolio composition given that the transaction is currently in its revolving period.

CREDIT ENHANCEMENT
As of the July 2017 payment date, credit enhancement to the Class A notes was 30.00%, stable as a result of the revolving period. Credit enhancement to the Class A Notes consists of subordination of the Class B notes. The transaction also benefits from a General Reserve, currently funded to the target level of EUR 21,429,000 and available to cover senior fees and Class A interest.

Société Générale S.A. is the account bank for the transaction. The account bank reference rating of AA (low) – being one notch below the DBRS public Long Term Critical Obligations Rating of Société Générale S.A. at AA – complies with the Minimum Institution Rating, 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 to the rating is: “Master European Structured Finance Surveillance Methodology”. DBRS 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 be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the amended transaction legal documents has been conducted following an amendment executed on 7 February 2017, reducing the portfolio minimum weighted-average interest rate to 4.5% from 5.0% and reducing the Class A Euribor cap to 0% from 0.75%. The other transaction legal documents have remained unchanged since the most recent rating action and a review was not conducted.

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” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of data and information used for this rating include investor reports provided by EuroTitrisation (the Management Company) and European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the 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.

The last rating action on this transaction took place on 23 September 2016, when DBRS confirmed the Class A notes at AAA (sf), following a structural amendment to the transaction.

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 with the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a lifetime base-case probability of default (PD) and loss given default (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 7.34% and 69.69%, 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 (sf), assuming no change in the PD. If the PD increases by 50%, the rating for 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 (sf).

Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in LGD, expected rating of AA (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 A (high) (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 Authority 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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 8 October 2013

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The rating methodologies 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
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Unified Interest Rate Model for European Securitisations

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.