Morningstar DBRS Assigns Provisional Credit Rating to BPCE Consumer Loans FCT 2024

DBRS Ratings GmbH (Morningstar DBRS) assigned a provisional credit rating of AAA (sf) to the Class A Notes to be issued by BPCE Consumer Loans FCT 2024 (the Issuer).

Morningstar DBRS did not assign a provisional credit rating to the Class B Notes (together with the Class A Notes, the Notes) also expected to be issued in this transaction.

The credit rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date.

The Notes are backed by a portfolio of fixed-rate, unsecured, amortising consumer loans granted without a specified purpose to private individuals domiciled in France and serviced by participating Banque Populaire (BP) and Caisse d’Epargne (CE) banks (each bank, a seller and servicer).

CREDIT RATING RATIONALE
The credit ratings are based on the following analytical considerations:
-- The transaction's structure, including form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the Issuer’s financial obligations according to the terms under which the Notes are issued;
-- The credit quality of the collateral, historical and projected performance of the portfolio, and Morningstar DBRS’ projected performance under various stress scenarios;
-- An operational risk review of the sellers capabilities with regard to its originations, underwriting, servicing, and financial strength;
-- The transaction parties’ financial strength with regard to their respective roles;
-- Morningstar DBRS’ sovereign credit rating on the Republic of France, currently at AA (high) with a Stable trend; and
-- The expected consistency of the transaction’s structure with Morningstar DBRS’ “Legal Criteria for European Structured Finance Transactions” and “Derivative Criteria for European Structured Finance Transactions” methodologies.

TRANSACTION COUNTERPARTIES
The transaction features a 16-month revolving period during which time the Issuer will purchase new receivables that the originator may offer, provided that certain conditions set out in the transaction documents are satisfied.

The transaction benefits from a liquidity reserve equal to 1.25% of the Class A Notes and Class B Notes balance funded collectively by each seller at closing that is available to cover the senior expense, swap cost, and interest shortfalls.

A commingling reserve facility is expected to be funded collectively by each seller if BPCE’s credit rating falls below BBB (low). The required amount is equal to one month of expected principal, interest, and prepayment collections.

COUNTERPARTIES
BPCE is the issuer account bank and specially dedicated account bank for the transaction. Morningstar DBRS has a private credit rating on BPCE, which meets the criteria to act in both capacities at closing. The downgrade provisions in the documentation are largely consistent with Morningstar DBRS’ criteria and the transaction will be monitored based on Morningstar DBRS’ credit rating on BPCE or its replacement.

Natixis is the swap counterparty for the transaction. Morningstar DBRS has a private credit rating on Natixis, which meets the criteria to act in such capacity at closing. The downgrade provisions in the swap documentation are largely consistent with Morningstar DBRS’ criteria and the transaction will be monitored based on Morningstar DBRS’ credit rating on Natixis or its replacement.

Morningstar DBRS’ credit rating on the Class A Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each class of the Notes are the related Interest Amounts and Principal.

Morningstar DBRS’ credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

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

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit rating is Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219.

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

Morningstar DBRS 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 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://dbrs.morningstar.com/research/421590.

The sources of data and information used for this credit rating include the historical data provided by the originator through the arranger as below:
-- Monthly static cumulative total gross defaults from January 2014 to March 2024;
-- Monthly static cumulative recoveries from January 2014 to March 2024;
-- Dynamic monthly prepayments from February 2014 to March 2024;
-- Dynamic monthly delinquencies from February 2014 to March 2024;
-- Dynamic monthly yield from February 2014 to March 2024;
-- Dynamic monthly defaults from February 2014 to March 2024; and
-- Dynamic monthly recoveries from February 2014 to March 2024.

Morningstar DBRS also received a set of stratification tables and loan-by-loan data in relation to the provisional collateral pool as of 31 March 2024 and its related contractual amortisation schedule.

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

Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

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

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

A provisional credit rating is not a final credit rating with respect to the above-mentioned security and may change or be different than the final credit rating assigned or may be discontinued. The assignment of a final credit rating on the above-mentioned security is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit rating.

This credit rating concerns an expected-to-be-issued new financial instrument. This is the first Morningstar DBRS credit rating on this financial instrument.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):
-- Expected default: 3.0%
-- Expected recovery: 34% or loss given default (LGD) 66%

Scenario 1: A 25% increase in the expected default
Scenario 2: A 50% increase in the expected default
Scenario 3: A 25% increase in the expected LGD
Scenario 4: A 25% increase in the expected default and a 25% increase in the expected LGD
Scenario 5: A 50% increase in the expected default and a 25% increase in the expected LGD

Morningstar DBRS concludes that the expected credit rating under the five stress scenarios would be:
-- Class A Notes: AA (high) (sf), AA (sf), AA (high) (sf), AA (sf), A (sf)

For further information on Morningstar DBRS 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 Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Ricardo Garcia, Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 18 April 2024

DBRS Ratings GmbH, Sucursal en España
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28046 Madrid, Spain
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 credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219
-- Rating European Structured Finance Transactions Methodology (11 December 2023), https://dbrs.morningstar.com/research/425149
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024), https://dbrs.morningstar.com/research/429054
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://dbrs.morningstar.com/research/420754
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030

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

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