DBRS Confirms FCT Opera 2014 Class A Notes at AAA (sf)

DBRS Ratings Limited (DBRS) confirmed the AAA (sf) rating on the Class A Notes issued by FCT Opera 2014 (Opera 2014).

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

-- Portfolio performance, in terms of delinquencies and defaults.
-- Portfolio default (PD) rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Opera 2014, which closed in November 2014, is a securitisation of French home loans and their Ancillary Rights originated and serviced by BNP Paribas S.A. (BNPP). The first restructure of the transaction took place in July 2015 with the balance on the Class A Notes reduced, Class B Notes increased and the reserve fund reduced. The second restructuring took place in November 2016 whereby the balances of Class A Notes and Class B Notes were increased and a Second Revolving Period was added (http://dbrs.com/research/302328/dbrs-confirms-ratings-on-fct-opera-2014-class-a-notes-following-amendment.html). At the last restructuring, the outstanding balances of the Class A and Class B Notes were EUR 5,397,300,000 and EUR 2,658,500,000, respectively.

The transaction is currently in the Second Revolving Period, which is expected to end in November 2018.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The asset portfolio is performing within DBRS’s expectations. As of 31 July 2017, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance were at 0.01%, and loans more than 30 days delinquent were at 0.08%. The cumulative default ratio is 0.25%. DBRS has updated the base case PD and LGD assumptions for the collateral pool to 2.7% and 23.4%, respectively, following an updated collateral analysis.

CREDIT ENHANCEMENT AND RESERVE
As of 25 August 2017, the CE available to the Class A Notes remained unchanged at 38% as the transaction is still in the revolving period. The sources of CE are the subordination of the Class B Notes and the reserve fund, which is currently at its target amount.

BNP Paribas Securities Services acts as the Account Bank to the transaction. Its current DBRS private rating meets the Minimum Institution Rating criteria, given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

BNPP acts as the Swap Counterparty to the transaction. BNPP’s DBRS Long Term Critical Obligations Rating of AA (high), complies with the first rating threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the rating assigned to the Class A Notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “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.

An asset and a cashflow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal 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 data and information used for this rating are loan-by-loan data from European DataWarehouse GmbH as well as monthly investor reports provided by the Management Company, France Titrisation.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the restructuring that occurred in November 2016, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 22 November 2016, when DBRS confirmed the rating on the Class A Notes following a transaction restructuring.

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 ratings (the “Base Case”):

-- DBRS expected a base case PD and LGD for the revolving collateral pool based on a review of the current assets as well as the transaction’s eligibility and replenishment criteria. 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 assumptions for the collateral pool are 2.7% and 23.4%, respectively. At the AAA (sf) rating level, the corresponding PD is 23.2% and the LGD is 34.6%.

-- 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 on the Class A Notes would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to be at AAA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, 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% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, 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 and US regulations only.

Lead Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 4 November 2014

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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

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

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