Morningstar DBRS Confirms Credit Rating on Red & Black Consumer France 2013 Following Amendment

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AA (sf) credit rating on the Class A notes issued by Red & Black Consumer France 2013 (the Issuer), following a transaction amendment (the Amendment).

The credit rating on the Class A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in November 2049.

CREDIT RATING RATIONALE
The credit rating confirmation is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the September 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on a potential portfolio migration based on the replenishment criteria set forth in the transaction legal documents, considering the updated vintage default and recovery data received in the context of the Amendment;
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AA (sf) credit rating level;
-- No revolving termination events have occurred; and
-- An amendment to the transaction executed on 17 October 2024 and effective from 20 November 2024.

The transaction is a securitisation of French unsecured consumer loans originated and serviced by Franfinance SA (formerly, Sogéfinancement), a subsidiary of Société Générale, S.A. The pool comprises standard, compact, and student loans. The transaction closed in October 2013 and was last restructured in November 2020. The 2020 restructuring included the implementation of a four-year revolving period which was scheduled to end in November 2024 prior to the Amendment. During the revolving period, the Issuer can purchase new receivables subject to certain conditions being met.

AMENDMENT
The amendment to the transaction involves the following:
-- An extension of the revolving period to the payment date in November 2028 from November 2024;
-- An extension of the legal final maturity date to the payment date in November 2049 from November 2039;
-- The Class A notes coupon will increase to 1.0% from 0.6%;
-- The Account Bank Required Morningstar DBRS Long-term Rating was lowered to BBB (high) from A (low), while the Critical Obligation Requirement remains at A (low);
-- Introduction of a specific rating trigger for the special dedicated account bank of at least a Critical Obligations Rating of BBB or a Long-Term Rating of BBB (low); and
-- Require a Commingling Reserve deposit within 60 calendar days following the occurrence of a Commingling Reserve Trigger Event, previously 30 days.

PORTFOLIO PERFORMANCE
As of the September 2024 payment date, loans two to three months in arrears represented 0.19% of the outstanding portfolio balance and loans more than three months in arrears represented 0.2%. Gross cumulative defaults as a percentage of the original balance of the aggregate initial and additional portfolio balances were 2.5%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS maintained its base case PD and LGD at 6.2% and 61.6%, based on updated historical data received from Société Générale S.A and transaction performance since closing. The portfolio assumptions continue to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
As of the September 2024 payment date, credit enhancement available to the Class A notes was 22.5%, stable since the 2020 issuance date because of the revolving period. Credit enhancement available to the Class A notes consists of the subordination of the Class B notes.

The transaction benefits from a general reserve currently funded to its target level of EUR 16.8 million, equal to 0.5% of the outstanding balance of the Class A and Class B notes. The general reserve is available to cover senior fees and Class A interest.

Société Générale, S.A. (Société Générale) acts as the account bank for the transaction. Based on Morningstar DBRS' account bank reference credit rating of Société Générale at AA (low), which is one notch below the Morningstar DBRS Long-Term Critical Obligations Rating of AA, 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 Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit rating on 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 the Class A notes are the related interest amounts, deferred interest amounts, and principal amounts.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) 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 factor(s) 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 Factors in Credit Ratings (13 August 2024) https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the credit rating are the "Master European Structured Finance Surveillance Methodology" (6 August 2024) https://dbrs.morningstar.com/research/437540 and "Rating European Consumer and Commercial Asset-Backed Securitisations" (18 September 2024) https://dbrs.morningstar.com/research/439583.

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

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

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on the replenishment criteria set forth in the transaction legal documents.

Morningstar DBRS has conducted a review of the transaction legal documents provided in the context of the Amendment. The other transaction legal documents have remained unchanged since the most recent rating action and as such, a review has not been conducted.

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/436000.

The sources of data and information used for this credit rating include loan-level data, investor reports, and static and dynamic historical performance data, all provided by Société Générale, S.A.;
-- Quarterly default and recovery historical vintage data from Q1 2014 to Q4 2023, split by personal failure, bankruptcy with or without moratorium (except for student loans);
-- Dynamic prepayment data from Q1 2014 to Q4 2023; and
-- Dynamic delinquency data from Q1 2014 to Q4 2023.

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 not 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.

The last credit rating action on this issuer took place on 6 October 2023, when Morningstar DBRS confirmed its AA (sf) credit rating on the Class A notes.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://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):

-- 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 current pool of loans for the Issuer at the B low (sf) credit rating level are 6.2% and 61.6%, respectively.
-- The risk sensitivity overview below illustrates the credit ratings 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 AA (low) (sf)
-- 50% increase in LGD, expected credit rating of A (high) (sf)
-- 25% increase in PD, expected credit rating of AA (low) (sf)
-- 50% increase in PD, expected credit rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (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: Daniel Rakhamimov, Assistant Vice President,
Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Rating Date: 8 October 2013

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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 (18 September 2024) https://dbrs.morningstar.com/research/439583
Master European Structured Finance Surveillance Methodology (6 August 2024)
https://dbrs.morningstar.com/research/437540
Legal Criteria for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435165
Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024) https://dbrs.morningstar.com/research/439571
Interest Rate Stresses for European Structured Finance Transactions (24 September 2024) https://dbrs.morningstar.com/research/439913
Rating European Structured Finance Transactions Methodology (18 September 2024)
https://dbrs.morningstar.com/research/439581
Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024) https://dbrs.morningstar.com/research/437781

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.