DBRS Downgrades Ratings on FCT Ginkgo Compartment Debt Conso 2015-1 Following Restructure

DBRS Ratings Limited (DBRS) downgraded the ratings on the following bonds issued by FCT Ginkgo Compartment Debt Conso 2015-1 (the Issuer):

-- Class A Asset-Backed Fixed-Rate Notes to A (sf) from AA (low) (sf)
-- Class B Asset-Backed Fixed-Rate Notes to BBB (sf) from A (sf)

The ratings on the Class A Asset-Backed Fixed-Rate Notes (Class A Notes) and Class B Asset-Backed Fixed-Rate Notes (Class B Notes) address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The rating actions follow a structural amendment to the transaction effective as of the interest payment date on 25 September 2018 and are also based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

FCT Ginkgo Compartment Debt Conso 2015-1 is a securitisation of French debt consolidation loans originated and serviced by Crédit Agricole Consumer Finance.

STRUCTURAL AMENDMENT
-- Purchase of an additional collateral portfolio funded via the additional issuance of Class A Notes, Class B Notes and Class C Notes. The outstanding principal balance of the Class A Notes has increased to EUR 710,000,000, the outstanding principal balance of the Class B Notes has increased to EUR 85,000,000 and the outstanding principal balance of the Class C Notes has increased to EUR 205,200,000.
-- The commencement of a three-year revolving period scheduled to end in September 2021. DBRS has stressed the portfolio in accordance with the eligibility requirements and portfolio criteria specified in the transaction documentation in order to assess the “worst case” that the portfolio characteristics can migrate to.
-- Reduction of the fixed-rate coupons on the Class A Notes and Class B Notes to 1.7% and 2.6% respectively and increase of the fixed-rate coupon on the Class C Notes to 7.3%.

PORTFOLIO PERFORMANCE
As of the July 2018 cut-off date, loans that were two- to three-months in arrears represented 1.5% of the outstanding portfolio balance, up from 1.1% in July 2017. As of July 2018, the 90+ delinquency ratio was 1.3%, up from 0.6% in August 2017. As of July 2018, the cumulative percentage of non-performing loans was 4.5%.

PORTFOLIO ASSUMPTIONS
DBRS adjusted its base case PD and LGD assumptions on the collateral pool to 16.3% and 67.4% from 10.7% and 90.0%, respectively. The increase in PD and decrease in LGD were driven by a reassessment of the default and recovery vintage data provided by Crédit Agricole Corporate and Investment Bank (CA CIB) in its capacity as Arranger.

CREDIT ENHANCEMENT
Post-restructuring, credit enhancement to the Class A Notes decreased to 29.0% from 33.6% on the August 2018 interest payment date. Credit enhancement to the Class B Notes decreased to 20.5% from 24.4%. Credit enhancement to each class of Notes consists of subordination of junior classes.

The transaction benefits from a non-amortising General Reserve that has increased to its target level of EUR 10,002,000, set at 1.0% of the outstanding principal balance of the Class A, B and C Notes as of the restructure date. The General Reserve is split into a Class A Reserve Ledger (0.9%) available to cover senior fees and Class A interest, and a Class B Reserve Ledger (0.1%) available to cover senior fees, Class A and B interest and Class A principal via the principal deficiency ledger.

The transaction also benefits from a Commingling Reserve that has increased to EUR 26.4 million from EUR 14.0 million prior to the restructure date.

Credit Agricole Consumer Finance acts as the account bank for the transaction. The DBRS private rating of Credit Agricole Consumer Finance is consistent 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 methodologies applicable to the ratings are: “Master European Structured Finance Surveillance Methodology” and “Rating European Consumer and Commercial Asset-Backed Securitisations”. DBRS has applied the principal methodologies consistently and conducted a review of the transaction in accordance with the principal methodologies.

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

DBRS has conducted a review of the transaction legal documents provided in the context of the aforementioned amendment. The other transaction legal documents have remained unchanged since the most recent rating action and as such, a review has not been conducted.

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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include portfolio and performance data provided by CA CIB, investor reports provided by EuroTitrisation (the Management Company) and loan-level data provided by the European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of the initial rating, 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 these ratings 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 21 May 2018, when DBRS upgraded the ratings of the Class A Notes and Class B Notes to AA (low) (sf) and A (sf), respectively.

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 PD and 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 16.3% and 67.4%, 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 BBB (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to BBB (low) (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 BB (low) (sf).

Class A Notes Risk Sensitivity: -- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD, expected rating of BB (high) (sf)
-- 50% increase in PD, expected rating of BB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 8 July 2015

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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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.