Press Release

DBRS Morningstar Downgrades Rating on FCT Bpifrance SME 2019-1 Following Amendment

Structured Credit
October 20, 2021

DBRS Ratings GmbH (DBRS Morningstar) downgraded its rating on the Class A Notes issued by FCT Bpifrance SME 2019-1 (Bpifrance SME or the Issuer) to AA (high) (sf) from AAA (sf) following an amendment to the transaction (the Amendment).

The downgrade follows an entire review of the transaction and is based on the following analytical considerations:
-- The Amendment to the transaction executed on 19 October 2021, which primarily includes the transfer of an additional portfolio (the Additional Portfolio), financed with further increase of the notional of the notes’ subscription;
-- The portfolio performance in terms of delinquencies, defaults, and losses as of the July 2021 payment date;
-- Updated base case assumptions, considering the updated quarterly historical performance data received by DBRS Morningstar and the one-year probability of default (PD), recovery rate, and expected loss assumptions considering the aggregate of the existing portfolio and the Additional Portfolio (together, the Aggregate Portfolio);
-- The current available credit enhancement to the Class A Notes to cover expected losses assumed at the AA (high) (sf) rating level; and
-- The current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The rating of the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal payable on or before the maturity date in October 2052.

Bpifrance SME is a securitisation collateralised by a portfolio of secured and unsecured loans to French small and medium-size enterprises (SMEs), granted and serviced by Bpifrance S.A. (Bpifrance, the Originator or the Servicer).

The transaction initially had a revolving period of three years that was scheduled to end in January 2023. The revolving period has been extended until October 2023, which is also the last additional purchase date. During this period, Bpifrance has the option to sell new loans at par to the Issuer as long as the eligibility criteria are complied with on a monthly basis. However, the revolving period will end prematurely if replenishment termination events occur (for example, if the cumulative default rate reaches a certain limit).

The Additional Portfolio is equal to EUR 1.49 billion and was transferred to the Issuer on 19 October 2021 (the Increase Date). As of the 30 September 2021 cut-off date, the Additional Portfolio accounted for 43.0% of the outstanding balance of the Aggregate Portfolio totalling EUR 3.46 billion.

On the Increase Date, the Class A and Class B Notes’ nominal balances were increased to finance the purchase of the Additional Portfolio and to replenish the cash reserve up to the target amount, equal to 0.2% of the Class A Notes’ principal amount outstanding.

Before the Amendment:
The amendment resulted in the issuance of additional EUR 1,218,991,891 of Class A Notes (for a total outstanding balance of EUR 2,769,891,891 million) and additional EUR 242,121,807 million of Class B Notes (for a total outstanding balance of EUR 692,421,807 million).

As a result of the new capital structure, the credit enhancement (CE) for the Class A notes decreased to 20.20% from 22.70%, which was the main factor leading to the downgrade rating action.

As of the July 2021 servicing report, the existing collateral portfolio consisted of 4,460 loans with an aggregate principal balance of EUR 2.0 billion (excluding defaulted loans).

The delinquency ratio, defined as the ratio between the outstanding balance of loans in arrears for more than 30 days (excluding defaulted loans) and the outstanding balance of the portfolio as of the end of the previous collection period, was 0.3%. The cumulative default ratio represented 0% of the aggregate portfolio balance.

As of 30 September 2021, the Aggregate Portfolio consisted of 6,829 loans for a total principal balance of EUR 3.46 billion. The Aggregate Portfolio is composed of senior unsecured loans representing 28.1% of the portfolio outstanding balance and mortgage-backed loans represent the remaining 71.9% of the portfolio outstanding balance.

During the revolving period, the transaction will acquire new loans if they satisfy the eligibility criteria. To account for changes in portfolio composition, DBRS Morningstar considered the limitations established in the eligibility criteria to create a stressed portfolio that was used for the analysis. The eligibility criteria allow for a relatively high limit regarding the DBRS Morningstar industry concentration: the maximum concentration in the Building and Development industry will be 35.0% of the portfolio balance, followed by Food Products and Lodging and Casinos, which could represent 32.0% and 13.5% of the portfolio balance, respectively.

The eligibility criteria also allow for high loan-to-value levels for the secured loans. As a result, DBRS Morningstar recovery assumptions are low.

As a positive, the eligibility criteria set low obligor concentration limits. The exposure to the top one, top 10, and top 20 borrower groups cannot exceed 0.4%, 3.7%, and 7.3% of the outstanding portfolio balance, respectively.

The transaction benefits from a principal deficiency ledger that ranks high in the interest priority of payments and will capture excess spread to cover principal shortfalls due to portfolio defaults. In addition, the Issuer benefits from a 1.66% weighted-average (WA) interest rate from the portfolio. According to the eligibility criteria, the minimum WA interest rate will be 1.3%, and the notes pay a fixed rate of 15 basis points and 0 basis points for the Class A and Class B Notes, respectively. DBRS Morningstar considers the excess spread to be a positive feature of this transaction.

There is limited interest rate risk in the transaction. The Class A and Class B Notes pay a fixed interest rate, and the assets could be fixed or floating, the effect of which is very small considering floating-rate loans can represent a maximum of 15.0% of the portfolio balance (in the Aggregate Portfolio, floating-rate loans represent 11.9% of the outstanding balance).

The Originator is not a deposit-taking entity; therefore, the risk that a borrower under the relevant SME loan would succeed in gaining set-off rights against sums due by the Originator is remote.

Based on the updated historical data provided by the Originator and considering the performance observed, DBRS Morningstar updated its base case PD assumption to 0.82%. Additional adjustments to expected performance were applied to account for the Coronavirus Disease (COVID-19) pandemic.

The assumed weighted-average life (WAL) of the portfolio is 6.1 years, in line with the eligibility criteria.

The PD and WAL were used in the DBRS Morningstar Diversity Model to generate the hurdle rate for the assigned rating.

The recovery rate was determined by considering market value decline assumptions for France, the security level, and the collateral type. A recovery rate of 20.27% was used for the unsecured loans and a recovery rate of 27.10% was used for secured loans at the AA (high) (sf) rating level.

Overcollateralisation of the outstanding collateral portfolio and the cash reserve provide credit enhancement to the Class A Notes. As at the July 2021 payment date, credit enhancement to the Class A Notes was 22.27%, decreasing to 20.2% post-Increase Date as a result of the new subordination levels following the transfer of the Additional Portfolio and the increase of the notional balance of the Class A and Class B Notes.

A non amortising cash reserve, funded at closing (October 2019) for an amount of EUR 4.0 million, is available to cover senior expenses and interest payments on the Class A Notes. The required level for the cash reserve was initially set at 0.2% of the Notes principal amount outstanding. On the Increase Date, the cash reserve will be topped up to achieve the required level of 0.2% of the Notes. On the payment date on which the Class A Notes will be redeemed in full, the cash reserve required level will be reduced to EUR 0.

BNP Paribas Securities Services (BNP SS) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNP SS, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in its proprietary Excel-based cash flow engine.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many SME transactions, some meaningfully. The rating is based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar increased the expected default rate for obligors in certain industries based on their perceived exposure to the adverse disruptions of the coronavirus.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. The DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: and

For more information on DBRS Morningstar considerations for European Structured Credit transactions and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar commentary:

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating CLOs Backed by Loans to European SMEs” (28 June 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at:

DBRS Morningstar 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. Due to the inclusion of a revolving period in the transaction, the analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

DBRS Morningstar conducted a review of the amended transaction documents, including, inter alia, the Master Amendment Agreement. A review of any other transaction legal documents was not conducted as these have remained unchanged since the most recent rating action.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at:

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report:

The sources of data and information used for this rating include performance data relating to the receivables provided by the Originator, Bpifrance S.A.; servicer reports provided by the Servicer; and an investor report provided by the calculation agent.

DBRS Morningstar received the following data information, split by mortgage and nonmortgage loans:
-- Static annual default and recovery data from Q1 2007 to Q1 2021;
-- Dynamic quarterly default data from Q1 2007 to Q1 2021;
-- Dynamic quarterly delinquency data from Q1 2007 to Q1 2021;
-- Dynamic quarterly prepayment data from Q1 2007 to Q1 2021.

DBRS Morningstar also received data information on the FCG guarantee enforcement.

In addition, DBRS Morningstar received loan-level characteristics and contractual amortisation profile, and set-off as at 30 September 2021.

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

At the time of the initial rating and of the Amendment, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

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

DBRS Morningstar 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 23 October 2020, when DBRS Morningstar confirmed the rating on the Class A Notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to María López.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- PD Rates Used: Base case PD of 0.82%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rate of 21.8% at the AA (high) (sf) rating level, and a 10% and 20% decrease in the base case recovery rate. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would not have an impact on the rating of the Class A Notes. A hypothetical decrease of the recovery rate by 20%, ceteris paribus, would not have an impact on the rating of the Class A Notes. A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the recovery rate by 10% would not have an impact on the rating of the Class A Notes.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: María López, Senior Vice President
Rating Committee Chair: Carlos Silva, Senior Vice President
Initial Rating Date: 17 October 2019

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at:

-- Rating CLOs Backed by Loans to European SMEs (28 June 2021) and DBRS Morningstar SME Diversity Model v2.5.0.0,
-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
-- Cash Flow Assumptions for Corporate Credit Securitizations (8 February 2021),
-- Rating CLOs and CDOs of Large Corporate Credit (8 February 2021),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (17 September 2021),
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021),
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021),

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at