DBRS Morningstar Assigns Rating to Boursorama Master Home Loans France

DBRS Ratings GmbH (DBRS Morningstar) assigned a rating of AA (sf) to the Class A Notes issued by Boursorama Master Home Loans France (the Issuer). The notes are collateralised by a portfolio of French residential loans originated by Boursorama, SA (the originator or the servicer). The portfolio of loans includes ancillary rights, which consist of Crédit Logement, S.A. guarantees securing 100% of the loans.

The Issuer issued two tranches of mortgage-backed securities (the Class A and Class B Notes) to finance the purchase of the portfolio. DBRS Morningstar does not rate the Class B Notes also issued in this transaction.

The rating assigned to the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the final maturity date in December 2066.

The Issuer was established as a fond commun de titrisation governed by French regulations. The transaction features a master trust structure with a four-year revolving period during which time the Issuer may issue additional series of Class A Notes to acquire additional home loans (including construction receivables) and their ancillary rights from the seller, subject to the availability of principal collections, eligibility criteria, and as long as no revolving period termination event has occurred, up to a maximum Class A principal outstanding amount of EUR 10 billion. On each subsequent issue date, the Class B Notes shall be mandatorily redeemed in full in accordance with the revolving period priority of payments and new Class B Notes shall be issued, maintaining the initial credit enhancement.

After the revolving period ends in December 2026, the notes will begin to amortise according to the normal amortisation period priority of payments. If an accelerated amortization event or a sequential amortisation event occurs and is continuing, the Class B Notes will not amortise until the Class A Notes have been redeemed in full. France Titrisation will manage the transaction.

At closing, the Class A Notes benefit from credit enhancement of 5.0% (calculated as a percentage of the portfolio), consisting of the subordination of the Class B Notes. The transaction also features a general reserve fund, which shall provide liquidity support for the payments of senior fees and interest on the Class A Notes, amortising in line with their outstanding balance and fully funded at closing by the originator. Any released amounts following the reserve’s amortisation will flow through the priority of payments.

The transaction structure also benefits from a commingling reserve, fully funded by the originator, made available in the event of a servicer disruption that results in collections not being available on any payment date. Such a reserve, set at 1.2% of the outstanding balance of the notes, shall be nonamortising.

Liquidity for the Class A Notes is also supported by the combined waterfall structure, whereby all monthly collections are distributed through a single priority of payments (principal to pay interest).

As of 31 October 2022, the portfolio consisted of 4,217 mortgage loans granted to 4,190 borrowers. As of the same date, the total current balance of the portfolio was EUR 2.7 billion and the average loan balance (per borrower) was EUR 644,387. The weighted-average (WA) seasoning of the portfolio was 1.8 years with a WA time to maturity of 21.3 years. The WA original loan-to-value ratio (LTV) of the portfolio stood at 86.3% whereas the WA current LTV was 77.4%. The portfolio is concentrated in Île-de-France, representing 81.7% of the pool balance.

The entire portfolio pays a fixed rate of interest, with a WA interest rate of 0.8%. The coupon on the notes is also fixed at 0.35% for the Class A Notes and 1.50% for the Class B Notes.

The transaction account bank, cash manager, custodian, and paying agent is Société Générale, S.A. Based on DBRS Morningstar’s rating on such entity and the account bank replacement provisions included in the transaction documents, DBRS Morningstar considers the risk associated with such counterparty to be consistent with the ratings assigned, in accordance with its “Legal Criteria for European Structured Finance Transactions”.

RATING RATIONALE
DBRS Morningstar based its rating primarily on the following considerations:
-- The transaction capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- The credit quality of the mortgage portfolio and the servicer’s ability to perform collection and resolution activities. DBRS Morningstar calculated probability of default (PD), loss given default (LGD), and expected loss (EL) outputs on the mortgage portfolio, which DBRS Morningstar uses as inputs into its cash flow tool. DBRS Morningstar analysed the mortgage portfolio in accordance with its “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”.
-- The transaction’s ability to withstand stressed cash flow assumptions and repay investors in accordance with the terms and conditions of the notes. DBRS Morningstar analysed the transaction structure using Intex Dealmaker.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer.
-- The sovereign rating on the Republic of France, rated AA (high) with a Stable trend by DBRS Morningstar, as of the date of this press release.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
General Considerations
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (17 May 2022).

DBRS Morningstar analysed the transaction structure in Intex DealMaker, considering the default rates at which the rated notes did not return all specified cash flows.

On 25 November 2022, DBRS Morningstar amended the above press release to include a disclosure with respect to information on historical default rates.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda” (7 October 2022).

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 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.

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/401817/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 this rating include historical performance (static pool defaults from 2012 to 2022; dynamic delinquencies data from 2014 to 2022; and dynamic prepayments data from 2012 to 2021) and loan-level data as at 31 October 2022 provided by the originator.

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

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.

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

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

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):

-- In respect of the Class A Notes, a PD of 17.22% and LGD of 8.73%, corresponding to the AA (sf) rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD, respectively.

DBRS Morningstar concludes the following impact on the Class A Notes:
-- 25% increase of the PD, ceteris paribus, would not lead to a rating change;
-- 50% increase of the PD, ceteris paribus, would not lead to a rating change;
-- 25% increase of the LGD, ceteris paribus, would not lead to a rating change;
-- 50% increase of the LGD, ceteris paribus, would not lead to a rating change;
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would not lead to a rating change;
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would not lead to a rating change;
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (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.

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

Lead Analyst: Antonio Laudani, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 24 November 2022

DBRS Ratings GmbH, Sucursal en España
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Tel. +34 (91) 903 6500

DBRS Ratings GmbH
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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.

-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (7 October 2022) and European RMBS Credit Model v. 1.0.0.0, https://www.dbrsmorningstar.com/research/403744/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022), https://www.dbrsmorningstar.com/research/402773/operational-risk-assessment-for-european-structured-finance-originators.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),
https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-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].