Morningstar DBRS Confirms Credit Rating on BPCE Consumer Loans FCT 2022
Consumer Loans & Credit CardsDBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A Notes issued by BPCE Consumer Loans FCT 2022 (the Issuer).
The credit rating addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in April 2043.
The credit rating confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses as of the May 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the revolving pool of receivables;
-- Current available credit enhancement to the Class A Notes to cover the expected losses at AAA (sf) credit rating level, and
-- No early amortisation event have occurred so far.
The transaction represents 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. The transaction features a 43-month revolving period which is scheduled to end with the February 2026 payment date. During the revolving period the Issuer 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 2024 payment date, loans that were two to three months in arrears represented 0.09% of the outstanding portfolio balance, up from 0.05% in May 2023. The 90+ days delinquencies increased to 0.08% from 0.05% and the cumulative default ratio increased to 0.61% from 0.15% in the same period.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted an analysis of the revolving pools of receivables and updated its lifetime gross default assumption to 3.0% from 3.1% at closing and maintained its base recovery assumptions at 66.0%.
CREDIT ENHANCEMENT
Credit enhancement to the Class A Notes is provided by the subordination of the unrated Class B Notes. As of the May 2024 payment date, due to the revolving period the credit enhancement to the Class A Notes remained at 18.0%.
The transaction benefits from liquidity reserve fund, which equal to 1.0% of the Class A Notes' balance subject to no floor. As of the May 2024 payment date, the reserve fund was at its initial level of EUR 12,195,000.
A commingling reserve facility is expected to be available to the Issuer if BPCE S.A. is downgraded below A. The required amount is equal to one month of expected principal, interest, and prepayment collections.
BPCE S.A. acts as the account bank for the Issuer. Based on Morningstar DBRS' private credit rating of BPCE S.A., the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.
Natixis acts as the swap counterparty for the Issuer. Morningstar DBRS' private credit rating of Natixis is consistent with the first rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.
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.
Morningstar DBRS' credit ratings do not address non-payment 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 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, 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 ratings is the "Master European Structured Finance Surveillance Methodology" (7 March 2024), https://dbrs.morningstar.com/research/429051.
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 transactions, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.
A review of the transaction 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 Morningstar DBRS 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 investor reports provided by Eurotitrisation, the Management Company, and loan-level data provided by the European DataWarehouse GmbH.
Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial credit rating, Morningstar DBRS was supplied with third-party assessments. However, this did not impact the credit rating analysis.
Morningstar DBRS considers the data and information available to it for the purpose 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.
The last credit rating action took place on 21 July 2023, when Morningstar DBRS confirmed its AAA (sf) credit rating on the Class A Notes.
Information regarding Morningstar DBRS 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 rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):
-- Morningstar DBRS 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 the Issuer are 3.0% 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.
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Rating Date: 19 July 2022
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.
-- Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051
-- 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 Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024), https://dbrs.morningstar.com/research/429054
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219
-- 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 info-DBRS@morningstar.com.
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