DBRS Finalises Provisional Rating on FCT Crédit Agricole Habitat 2015

DBRS Ratings Limited (DBRS) has today finalised its provisional rating of AAA (sf) previously assigned to the EUR 8.6 billion Class A notes issued by FCT Crédit Agricole Habitat 2015 (the Issuer). The Issuer is established as a Fonds Commun de Titrisation (FCT), governed by French regulations. At the Issue Date (21 October 2015), the Issuer will use the proceeds of the Class A notes, Class B notes and Residual Units to purchase the initial portfolio of home loans from the Sellers. The FCT has a five-year revolving period during which time each of the Sellers shall sell additional home loans to the Issuer subject to Amortisation Events. After the five-year Period ending in September 2020, the Notes will be repaid if the Caisses Régionales agree to repurchase the loans at a price allowing for the full repayment of the Notes.

Home loans in the portfolio are 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 are the 39 regional banks of the Crédit Agricole Group. Each of the Sellers is the Servicer of its respective portfolio. During the revolving period, the Issuer’s exposure in terms of portfolio mix by Seller is expected to remain constant based on the initial balance of the home loans sold to the Issuer as a percentage of the total home loans in the portfolio at the Issue Date (Contribution Ratio). Each Seller contributes an amount to fund the Liquidity Reserve Account equal to the Contribution Ratio multiplied by the Liquidity Reserve Account Deposit.

The Class A notes benefit from 14% credit enhancement which consists of subordination of the Class B notes. Additionally, the Class A notes benefit from a non-amortising Liquidity Reserve Account which is funded at the Issue Date in amount equal to 1% of the initial amount of aggregate principal amount outstanding of the Class A notes and of the Class B notes and is available to cover senior expenses & fees and Class A interest.

Up to and including the September 2020 payment date, the Class A notes receive a fixed coupon of 0.60% paid on a quarterly basis. Following the September 2020 payment date, the Class A notes will receive a coupon equal to 1-month Euribor + 0.75% paid at a senior level subject to a capped interest rate of 1.15% and paid on a monthly basis. Class A interest amounts above the capped interest rate will be subordinated in the priority of payments to the Class A amortisation amount.

As of 31 July 2015, the provisional portfolio consisted of 151,618 loans to 134,339 borrowers in 136,510 properties with a total balance of EUR 11.202 billion. The average current loan balance per borrower is EUR 83,390. The weighted-average seasoning of the portfolio is 4.0 years with a weighted-average maturity of 15.5 years. The weighted-average loan-to-value (LTV) of the portfolio is 74.6%. 22.3% of the portfolio is buy-to-let (BTL). 85.9% of the loans are fixed for life and there are no interest-only loans. 17.0% of the borrowers are self-employed. Loan-to-income multiples are relatively low with a weighted-average of 2.7x and just 24.61% of the portfolio is above 3.5x. The average borrower income is approximately EUR 55,000. The initial portfolio sold to the Issuer is approximately EUR 10 billion and has been selected from the provisional portfolio based on the eligibility criteria as of the 31 August 2015 selection cut-off date.

Amortisation Events include Global Portfolio Triggers which, if breached, would end the revolving period. The Global Portfolio Triggers establish thresholds for portfolio characteristics during the revolving period. For the purpose of the credit analysis of the portfolio, DBRS assumed a worse case portfolio based on these characteristics which include: 2% weighted-average interest rate; weighted-average remaining maturity of 18 years; weighted-average seasoning of two years; maximum floating-rate loans of 20%; maximum BTL of 30%; maximum second home loans of 7%; minimum acquisition home loans of 60%; weighted-average LTV of 82%; maximum CAMCA guarantee of 80%; and maximum mortgage guarantee of 45%.

Crédit Agricole S.A. (CA) is the Account Bank and the Specially Dedicated Account Bank for the transaction. The senior unsecured rating of CA is currently A (high) and complies with the threshold for the Account Bank given the rating assigned to the Class A notes. Additionally, the transaction documents include downgrade trigger language should CA be downgraded below the threshold. The transaction documents also include commingling triggers where, if CA is downgraded below investment grade, a commingling reserve would be funded by the Servicers.

The DBRS rating addresses timely interest on the Class A notes up to the capped interest rate amount and ultimately payment of principal by the Legal Final Maturity Date (21 October 2052). DBRS based the rating primarily on:

• The transaction capital structure, form and sufficiency of available credit enhancement and liquidity provisions.
• Worst-case portfolio based on the portfolio characteristic thresholds defined in the Global Portfolio Triggers. The worst-case portfolio was used with the EU RMBS Credit Model to estimate the expected probability of default (PD), loss given default (LGD) and expected loss for each rating scenario.
• The structural mitigants in place to avoid potential payment disruptions due to operational risk such as downgrade and replacement language in the transaction documents and the Liquidity Reserve Account.
• The ability of transaction 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable 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. This 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’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 Crédit Agricole S.A. and their representatives.

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 was 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.

This rating concerns a newly issued financial instrument.

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): in respect of the Class A notes, the PD and LGD at the AAA (sf) stress scenario of 25.87% and 54.87%, 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 lead to a downgrade to AA (high) (sf).
• 50% increase of the PD, ceteris paribus would lead to a downgrade to AA (sf).
• 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (high) (sf).
• 50% increase of the LGD, ceteris paribus would lead to a downgrade to AA (sf).
• 25% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (sf).
• 50% increase of the PD and 25% increase of the LGD, ceteris paribus would lead to a downgrade to AA (low) (sf).
• 25% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to AA (low) (sf).
• 50% increase of the PD and 50% increase of the LGD, ceteris paribus would lead to a downgrade to 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: Keith Gorman
Initial Rating Date: 19 October 2015
Initial Rating Committee Chair: Diana Turner

Lead Surveillance Analyst: Antonio Di Marco

DBRS Ratings Limited
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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

Legal Criteria for European Structured Finance Transactions
Operational Risk Assessment for European Structured Finance Servicers
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
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