DBRS Assigns Provisional Ratings to B-Cards SA

DBRS Ratings Limited (DBRS) has today assigned the following provisional ratings to the new Senior Notes and new Mezzanine Notes due December 2035 that are scheduled to be issued by B-Cards SA, SIC institutionnelle de droit belge Compartment B-Cards-I (B-Cards):

-- Senior Notes due December 2035 rated AA (low) (sf) and
-- Mezzanine Notes due December 2035 rated BBB (sf).

An amendment and restatement agreement, scheduled to be executed in October 2016, envisages the redemption of the existing Senior Notes and Mezzanine Notes and the issuance of new Notes with a Final Maturity Date in December 2035. The transaction uses a securitisation structure with the existing B-Cards SA special-purpose vehicle (SPV), where receivables were initially transferred on 15 April 2013. The transaction represents ongoing issuance from the Issuer collateralised through Buy Way Personal Finance S.A./NV’s revolving credit and instalment loan facilities in Belgium and Luxembourg.

The new Senior Notes benefit from a minimum credit support of 17.50%, which includes subordination of the new Mezzanine Notes (11.50%) and a Subordinated Loan (6.00%). The securitised portfolio consists of a pool of revolving credit facilities and instalment loans to retail customers secured by the repayment of the purchased receivables as well as any related rights and security. As at 30 June 2016, the revolving credit facilities and instalment loans represented the outstanding balances of 177,286 contracts with an average outstanding contract balance of EUR 1,461.

The ratings are based on DBRS’s review of the following analytical considerations:

-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- Relevant credit enhancement afforded to the new Senior Notes in the form of subordination through the new Mezzanine Notes and a Subordinated Loan.
-- Credit enhancement levels are sufficient to support the DBRS charge-off, payment and yield rate assumptions under various stress scenarios at an AA (low) (sf) standard for the Senior Notes and a BBB (sf) standard for the Mezzanine Notes issued by B-Cards.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The credit quality of the underlying collateral and the ability of the servicer to perform collection activities on the collateral.
-- The strong historical performance of the seller’s portfolio.
-- The sovereign rating of the Kingdom of Belgium, currently at AA (high).
-- The transaction’s consistency of the legal structure with the DBRS’s “Legal Criteria for European Structured Finance Transactions” and the presence of legal opinions that address the true sale of the assets to the Issuer and non-consolidation of the SPV with the seller.

The transaction was modelled in a proprietary model that separately assessed cash flows associated with revolving credit and instalment loan receivables.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Rating European Consumer and Commercial Asset-Backed Securitisations.

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. However, due to the inclusion of a revolving period in the transaction the initial analysis was based on worst-case replenishment criteria set forth in the transaction legal documents.

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 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 these ratings include performance data relating to the receivables provided by the Originator (Buy Way) through the arranger BNP Paribas Fortis SA/NV. DBRS received monthly dynamic historical performance data on balance, payment, yield, loss, origination and recovery data separated by product type (revolving credit facilities and instalment loans) and sourcing entity, relating to receivables performance from 2008 (instalments loans) and 2010 (revolving credit facilities) to Q1 2016. Further data was received that showed static performance specifically for instalment loans. DBRS considers that 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 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. This is the first DBRS rating on this 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 for the predominant revolving credit balances, as compared to the parameters used to determine the rating (each a specific Base Case):

-- Charge-Off Rate Used: Charge-off Rate of 4.4%, a 25% and 50% increase on the Base Case.
-- Payment Rate Used: Base-case Payment Rate of 7.5%, a 25% and 50% decrease of the Base Case.
-- Yield Rate Used: Yield Rate of 10.8%, a 25% and 50% decrease on the Base Case.
-- Purchase Rate Used: No purchases were assumed, a 0% Purchase Rate.

DBRS concludes that for the new Senior Notes due December 2035:
-- While holding the Payment Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 25% and a hypothetical decrease of the base case Yield Rate by 25%, ceteris paribus, would lead to the Senior Notes maintaining their rating of AA (low) (sf).
-- While holding the Payment Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 50% and a hypothetical decrease of the Yield Rate by 50%, ceteris paribus, would lead to a downgrade of the Senior Notes to AA (low) (sf).
-- While holding the Yield Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 25% and a hypothetical decrease of the Payment Rate by 25%, ceteris paribus, would lead to a downgrade of the Senior Notes to AA (low) (sf).
-- While holding the Yield Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 50% and a hypothetical decrease of the Payment Rate by 50%, ceteris paribus, would lead to a downgrade of the Senior Notes to A (sf).
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the base-case Payment Rate by 25% and a hypothetical decrease of the Yield Rate by 25%, ceteris paribus, would lead to a downgrade of the Senior Notes to AA (low) (sf).
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the base-case Payment Rate by 50% and a hypothetical decrease of the Yield Rate by 50%, ceteris paribus, would lead to a downgrade of the Senior Notes to A (high) (sf).

DBRS concludes that for the new Mezzanine Notes due December 2035:
-- While holding the Payment Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 25% and a hypothetical decrease of the base-case Yield Rate by 25%, ceteris paribus, would lead to a downgrade of the Mezzanine Notes to BBB (low) (sf).
-- While holding the Payment Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 50% and a hypothetical decrease of the Yield Rate by 50%, ceteris paribus, would lead to a downgrade of the Mezzanine Notes to BB (low) (sf).
-- While holding the Yield Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 25% and a hypothetical decrease of the Payment Rate by 25%, ceteris paribus, would lead to a downgrade of the Mezzanine Notes to a level below B (sf)
-- While holding the Yield Rate constant, a hypothetical increase of the base-case Charge-Off Rate by 50% and a hypothetical decrease of the Payment Rate by 50%, ceteris paribus, would lead to a downgrade of the Mezzanine Notes to a level below B (sf)
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the base-case Payment Rate by 25% and a hypothetical decrease of the Yield Rate by 25%, ceteris paribus, would lead to a downgrade of the Mezzanine Notes to BBB (low) (sf).
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the base-case Payment Rate by 50% and a hypothetical decrease of the Yield Rate by 50%, ceteris paribus, would lead to a downgrade in the Mezzanine Notes to B (high) (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: Alexander Garrod, Senior Vice President
Initial Rating Date: 14 September 2016
Initial Rating Committee Chair: Chuck Weilamann, Managing Director

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.

The rating methodologies used in the analysis of this transaction are listed below:

-- Rating European Consumer and Commercial Asset-Backed Securitisations (September 2015)
-- Legal Criteria for European Structured Finance Transactions (February 2016)
-- Operational Risk Assessment for European Structured Finance Servicers (December 2015)
-- Operational Risk Assessment for European Structured Finance Originators (December 2015)

A description of how DBRS analysis structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375