DBRS Morningstar Confirms Ratings of FCC Surf

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the notes issued by FCC Surf (the Issuer) as follows:

-- Series A1 Notes at A (sf)
-- Series A2 Notes at A (sf)
-- Series B1 Notes at A (sf)
-- Series B2 Notes at A (sf)

The ratings address the ultimate payment of interest and principal on or before the final repayment date in November 2024.

The Series A1 Notes and Series A2 Notes (together, the Series A Notes) and the Series B1 Notes and Series B2 Notes (together, the Series B Notes) were issued on 14 August 2007 (the Issuer Closing Date), pursuant to the Facility Agreement dated 24 July 2007, among Dexia Crédit Local and BNP Paribas S.A. (as Arrangers) and the FCC Surf Issuer Regulations dated 10 August 2007, among EuroTitrisation SA (as Management Company) and BRED Banque Populaire S.A. (as Custodian).

The Issuer is a mutual debt fund (fonds commun de créances) jointly created by EuroTitrisation SA and BRED Banque Populaire S.A.

This transaction is a French credit-linked note, governed under the laws of the Republic of France, which securitises the receivables arising from a bank loan to SANEF S.A., a French toll road operator. The Series A Notes and Series B Notes were partly funded at closing and continued to be funded in installments, until the Series A1 Notes and Series B1 Notes were fully funded as at February 2011, and the Series A2 Notes and Series B2 Notes were fully funded as at February 2016.

The proceeds of the Series A Notes and Series B Notes were used by the Issuer to purchase Loan Receivables from Dexia Crédit Local, Dublin Branch (as Originator). The Loan Receivables backing the Series A Notes and the Series B Notes are guaranteed by Assured Guaranty (Europe) plc, following the merger of Assured Guaranty (London) plc and Assured Guaranty (UK) plc in November 2018.

FCC Surf issued two Residual Units, which are not rated by DBRS Morningstar.

FCC Surf also entered into a swap with Dexia Crédit Local (as Swap Counterparty) on the Issuer Closing Date, where, throughout the life of the transaction, FCC Surf will pay a fixed base rate to Dexia Crédit Local in exchange for a floating-rate Euribor due to the Series A Notes and Series B Notes.

The rating confirmations follow an annual review of the transaction and reflect the following considerations:
(1) The Facility Agreement dated 24 July 2007, and other relevant transaction documents.
(2) The FCC Surf Issuer Regulations dated 10 August 2007.
(3) The credit quality of the relevant counterparties.
(4) The integrity of the transaction structure.
(5) DBRS Morningstar’s assessment of the financial guarantees in place.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate economic contraction, leading in some cases 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 structured credit transactions. The ratings are based on additional analysis to expected performance as a result of the global efforts to contain the spread of the coronavirus.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 9 December 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries:
https://www.dbrsmorningstar.com/research/389454/baseline-macroeconomic-scenarios-for-rated-sovereigns-december-2021-update and https://www.dbrsmorningstar.com/research/389454/baseline-macroeconomic-scenarios-application-to-credit-ratings.

On 18 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated Structured Credit transactions in Europe. For more details please see, https://www.dbrsmorningstar.com/research/361098/european-structured-credit-transactions-risk-exposure-to-coronavirus-covid-19-effect and
https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

ESG CONSIDERATIONS
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: https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating CLOs and CDOs of Large Corporate Credit” (8 February 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents 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:
https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

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: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include management reports provided by EuroTitrisation SA.

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

At the time of the initial ratings, DBRS Morningstar was not 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 these ratings 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 22 December 2020, when DBRS Morningstar confirmed the ratings of the Series A Notes and Series B Notes at A (sf).

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):

-- A one-notch downgrade to the assessment of the Guarantor of the loan receivables Assured Guaranty (Europe) plc.
-- A one-notch downgrade to the assessment of the Borrower SANEF S.A.

DBRS Morningstar concludes that a hypothetical downgrade to the assessment of the Guarantor rating by one notch, ceteris paribus, would lead to a downgrade of the Series A Notes and Series B Notes to A (low) (sf). A hypothetical one-notch downgrade to the assessment of the Borrower rating, ceteris paribus, would not have an impact on the current ratings. A scenario combining both the downgrade of the Guarantor and the Borrower rating would lead to a downgrade of the Series A Notes and Series B Notes to A (low) (sf).

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 30 December 2015

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:
https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (8 February 2021), https://www.dbrsmorningstar.com/research/373435/master-european-structured-finance-surveillance-methodology.
-- Rating CLOs and CDOs of Large Corporate Credit (8 February 2021), https://www.dbrsmorningstar.com/research/373423/rating-clos-and-cdos-of-large-corporate-credit.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021), https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-toenvironmental-social-and-governance-risk-factors-in-credit-ratings.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].