DBRS Confirms Rating on Red & Black Consumer France 2013

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

The confirmation of the rating on the Class A notes reflects solely the finalisation of counterparty replacement and amendments to capital structure as follows:

-- The role of Account Bank for the transaction has been assigned to HSBC France, S.A. from Societe Generale, S.A., previously.
-- The role of Cash Manager for the transaction has been assigned to HSBC France, S.A. from Societe Generale S.A., previously.
-- Pro rata reduction of the size of the Class A Notes, Class B Notes and Reserve fund, with no change in credit enhancement, as of the next payment date falling on 22 June 2015. The Class A Notes will be reduced to EUR 2.5 billion and the reserve fund to approximately EUR 26.7 million.

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. Credit enhancement to the Class A notes stems from the subordination of the Class B notes and remains equal to 30.00%.
The transaction also benefits 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 will be allowed to amortise down to 0.75% of the combined outstanding notes balance once the revolving period will end.

HSBC France, S.A. holds the Treasury Account for the transaction. The DBRS private rating of HSBC France, S.A. 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 applied is the Master European Structured Finance Surveillance Methodology. Due to the inclusion of a revolving period in the transaction, the collateral was initially modelled based on the worst-case replenishment criteria set forth in the transaction legal documents. These assumptions have not changed; moreover the capital structure was amortised proportionately as part of this amendment. Consequently no new asset or cash flow analysis was conducted. Other methodologies referenced in this transaction are listed at the end of this press release and may be found at
http://www.dbrs.com/about/methodologies.

Given the nature of the restructuring, DBRS conducted a review of the amended legal documents.

The sources of information used for this rating include amended documentation and amended capital structure provided by Société Générale Corporate and Investment Banking. 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 23 September 2014, when DBRS confirmed the rating on the Class A notes at AAA (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies is available at 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 mortgages for the Issuer are 6.84% and 73.53%, 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 decrease 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 decrease 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 decrease 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 AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (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 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: Chuck Weilamann

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.
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.
-- Derivative 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.

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