DBRS Confirms Rating of FCT Opera 2014 Class A Notes

DBRS Ratings Limited (DBRS) has today confirmed the AAA (sf) rating on the Class A Notes issued by FCT Opera 2014 (Opera 2014). The rating confirmation is based on the results of additional cash flow analysis conducted following the last rating confirmation on 28 July 2016.

In this cash flow analysis, DBRS applied recovery analysis on the underlying portfolio based on historical loan recovery rates. This approach deviates from DBRS’s “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda” methodology, which utilizes loss given default (LGD) analysis based on the loan and borrower characteristics, and the mortgaged property values. The collateral portfolio of Opera 2014 consists of home loans and their Ancillary Rights, which are not always secured by mortgages. Consequently, analysis of historical loan recovery rates better reflects the loan risks and loss severities.

The cumulative recovery curves were estimated using historical recovery data provided by BNP Paribas. The estimated recovery curves assume recoveries begin one quarter after default on the underlying loan and reach a terminal recovery value after ten years. For the base-case estimate, the initial recovery rate one quarter after default is 57.07%, with a terminal cumulative recovery rate of 93.66% over ten years. For the AAA (sf) scenario, the initial recovery rate one quarter after default is 43.76%, with a terminal cumulative recovery rate of 71.82% after ten years.

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 limited to the estimation of loss severity and the cash flow analysis.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

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

The sources of information used for this rating include the investor reports provided by France Titrisation and the loan by loan data from 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 to be 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 28 July 2016, when DBRS confirmed the AAA (sf) rating on the Class A Notes.

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

-- The base case PD assumption for the remaining collateral pool is 4.45%. At the AAA (sf) rating level, the corresponding PD is 27.37%. The base case and AAA (sf) recovery curves are previously described.

-- The Risk Sensitivity below illustrates the ratings expected if the PD and Recovery assumptions are changed by a certain percentage over the base-case assumption. For example, if the recoveries decrease by 50%, the rating to the Class A Notes would be expected to remain at AAA (sf), assuming no change in PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), assuming no changes in recoveries. Furthermore, if PD increases and recoveries decrease by 50%, the rating would be expected to remain at AAA (sf).

Class A Notes Risk Sensitivity:
-- 25% decrease in recoveries, expected rating of AAA (sf)
-- 50% decrease in recoveries, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% decrease in recoveries, expected rating of AAA (sf)
-- 25% increase in PD and 50% decrease in recoveries, expected rating of AAA (sf)
-- 50% increase in PD and 25% decrease in recoveries, expected rating of AAA (sf)
-- 50% increase in PD and 50% decrease in recoveries, expected rating of AAA (sf)

For further information on DBRS historical 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: Keith Gorman
Initial Rating Date: 4 November 2014
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President

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

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.