Press Release

DBRS Morningstar Confirms Credit Ratings on BPCE Demeter Tria FCT and BPCE Consumer Loans FCT 2022

Consumer Loans & Credit Cards

July 21, 2023

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) credit ratings on the Class A Notes issued by BPCE Demeter Tria FCT (Demeter Tria) and BPCE Consumer Loans FCT 2022 (Consumer Loans) (together, the Issuers).

The credit ratings address the timely payment of interest and the ultimate repayment of principal by the respective legal final maturity dates.

The credit rating confirmations follow an annual review of the transactions and are based on the following analytical considerations:

-- Portfolio performances, in terms of delinquencies, defaults, and losses as of the May 2023 payment dates;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the revolving pools of receivables;
-- No early amortisation events have occurred so far; and
-- Current available credit enhancements to the Class A Notes in both transactions to cover the expected losses at the AAA (sf) credit rating level.

The transactions represent the issuance of Class A and Class B Notes ultimately backed by a pool of fixed-rate, unsecured, and amortising consumer loans granted to individuals domiciled in France by the participating affiliate banks of BPCE Group. Demeter Tria had an initial 24 month of revolving period, which is scheduled to end with the July 2023 payment date. Consumer Loans had an initial 43 month of revolving period, which is scheduled to end with the February 2026 payment date. During the revolving period the Issuers will purchase new receivables that the originator may offer, provided that certain conditions set out in the transaction documents are satisfied.

PORTFOLIO PERFORMANCE
As of the May 2023 payment date, no loans were in arrears or defaults, in line with the eligibility criteria during the revolving period of Demeter Tria. In Consumer Loans, loans two to three months in arrears represented 0.05% of the outstanding portfolio balance. The 90+ days delinquencies, too, were 0.05% and the cumulative default ratio increased to 0.15% from 0.0% at closing.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted an analysis of the revolving pools of receivables and maintained its lifetime gross default and recovery assumptions at 3.5% and 39.5%, respectively, for Demeter Tria and 3.1% and 64.0%, respectively, for Consumer Loans.

CREDIT ENHANCEMENT
Credit enhancements to the Class A Notes in both transactions is provided by the subordination of the unrated Class B Notes. As of the May 2023 payment date, due to the revolving period the credit enhancements to the Class A Notes remained at 24.5% and 18.0% for Demeter Tria and Consumer Loans, respectively.

The transactions benefit from liquidity reserve funds, which equal to 1.05% of the Class A Notes’ balance subject to a floor of EUR 500,000 for Demeter Tria and 1.0% of the Class A Notes’ balance subject to no floor for Consumer Loans. As of the May 2023 payment date, the reserve funds were at their initial levels of EUR 7,875,000 (Demeter Tria) and EUR 12,195,000 (Consumer Loans).

Commingling reserve facilities are expected to be available to the Issuers if BPCE S.A. is downgraded below BBB. The required amount is equal to two months of expected principal, interest, and prepayment collections in case of Demeter Tria and one month of expected principal, interest, and prepayment collections in case of Consumer Loans.

BPCE S.A. acts as the Issuers’ account bank in both transactions. Based on DBRS Morningstar’s private credit rating of BPCE S.A., the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to both Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Natixis SA (Natixis) acts as the cap counterparty for Demeter Tria and the swap counterparty for Consumer Loans. DBRS Morningstar's private credit rating on Natixis is consistent with the first rating threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar’s credit ratings on the Class A Notes in both transactions address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that the Issuers will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant impact 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/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-credit ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in these transactions are listed at the end of this press release.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transactions 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 transactions, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transactions legal documents.

A review of the transactions legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating actions.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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 these credit ratings include investor reports provided by Eurotitrisation, the Management Company; and loan-level data provided by the European DataWarehouse GmbH.

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

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

DBRS Morningstar considers the data and information available to it for the purpose of providing these credit ratings to be of satisfactory quality.

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

The last credit rating action on Demeter Tria took place on 27 July 2022, when DBRS Morningstar confirmed its AAA (sf) credit rating on the Class A Notes. For Consumer Loans, this is the first credit rating action since the initial credit rating date.

The lead analyst responsibilities for Consumer Loans have been transferred to Shalva Beshia.

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

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

-- DBRS Morningstar 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 revolving pool of loans for Demeter Tria are 3.5% and 60.5%, respectively.
-- The base case PD and LGD of the revolving pool of loans for Consumer Loans are 3.1% and 66.0%, respectively.
-- The risk sensitivity overview below illustrates the credit rating 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 credit rating of the Class A Notes in Demeter Tria would be expected to fall to AA (sf), assuming no change in the PD. If the PD increases by 50%, the credit rating of the Class A Notes would be expected to fall to AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the credit rating of the Class A Notes would be expected to fall to A (sf).

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

Consumer Loans
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (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://registers.esma.europa.eu/cerep-publication/. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 July 2021 (Demeter Tria)
Initial Rating Date: 19 July 2022 (Consumer Loans)

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 these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

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].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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