DBRS Confirms Rating on Red & Black Consumer France 2013

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

The rating action on the Class A Notes is based on the following analytical considerations as described more fully below:

-- A structural amendment to the transaction signed on 13 September 2016 and effective as of the September 2016 interest payment date.
-- Portfolio performance in terms of delinquencies and defaults, as of the August 2016 payment date.
-- Updated default, recovery and loss assumptions on the remaining collateral pool.
-- 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 by Sogéfinancement, a French subsidiary of Société Générale and Franfinance.

The amendment to the transaction consists of:

-- A three-year extension of the revolving period until October 2019
-- Reduction of the cap on the Class A Euribor reference rate to 0.75% from 2.00% (effective as of the October 2016 interest payment date)
-- Reduction of Class A margin to 0.45% from 1.25% and of the Class B fixed-rate coupon to 1.10% from 3.00% (effective as of the October 2016 interest payment date)
-- Reduction of the General Reserve to EUR 21,429,000 from EUR 26,786,250 with the target amount set at 0.60% of the Class A and Class B Notes.
-- Reduction of the minimum interest rate on the portfolio to 5.00% from 5.50%

As of August 2016, the 90+ delinquency ratio was 0.29%. The cumulative default ratio was 3.13%.

As of the August 2016 payment date, credit enhancement to the Class A Notes was 30.00%, stable due to the revolving period. Credit enhancement to the Class A Notes consists of subordination of the Class B Notes.

On 23 June 2016, Société Générale S.A. replaced HSBC France S.A. as account bank for the transaction. The DBRS public rating of Société Générale S.A. 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 is the “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. A review of the amended transaction legal documents has been conducted.

Other methodologies and criteria 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 the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

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

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 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.

The last rating action on this transaction took place on 22 September 2015, when DBRS confirmed the Class A Notes at AAA (sf). The lead responsibilities for this transaction have been transferred to Andrew Lynch.

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 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 (“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: Bruno Franco
Initial Rating Date: 8 October 2013
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Andrew Lynch, Senior Financial Analyst
Rating Committee Chair: Chuck Weilamann, Managing Director

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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
-- 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.