Morningstar DBRS Confirms Credit Rating on FCT Pyramides 2022

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit rating on the notes issued by FCT Pyramides 2022 (the Issuer) as follows:

-- Class A Notes at AA (high) (sf)

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in July 2058.

CREDIT RATING RATIONALE
The 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 January 2025 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the receivables;
-- The current available credit enhancement to the Class A Notes to cover the expected losses at the AA (high) (sf) credit rating level; and
-- No purchase termination events or breach of transfer limits to date.

The transaction is a securitisation of French home loans and their ancillary rights originated and serviced by BNP Paribas SA (BNPP, the Seller or the Servicer). The transaction closed in April 2022 and originally featured a 24-month revolving period, which was expected to end in April 2024. The revolving period was extended by an additional 24 months and is now expected to end in April 2026. During this time, the Issuer may acquire additional home loans and their ancillary rights from BNPP subject to the availability of principal collections and eligibility criteria. To date, no revolving period termination event has occurred. Once the revolving period ends, the Class A Notes will amortise sequentially. France Titrisation is the management company of the transaction.

The home loans in the portfolio are secured by either a Crédit Logement, SA (CL) guarantee (59.9%), a mortgage over the relevant property (32.1%), or other guarantees including personal and combined guarantees.

PORTFOLIO PERFORMANCE
As of the 31 December 2024 portfolio cut-off date, delinquencies were low, with total arrears representing 0.3% of the outstanding portfolio balance. The gross cumulative default ratio stood at 0.6% of the initial portfolio, up from 0.4% in December 2023.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS updated its base-case PD and LGD assumptions to 2.4% and 13.0% respectively, at the B (sf) credit rating level. Morningstar DBRS continues to base its analysis on worst-case portfolios constructed to address potential migration toward the riskiest products during the revolving period.

CREDIT ENHANCEMENT
The Class A Notes benefit from 5.0% credit enhancement, which consists of subordination of the unrated Class B Notes. Additionally, the Class A Notes benefit from an amortising liquidity reserve fund (LRF), which was fully funded at closing for an amount equal to 0.5% of the Class A Notes' outstanding balance, or EUR 38.0 million. The LRF has a floor of 0.25% of the Class A Notes' initial balance. The LRF will amortise in line with the Class A Notes' outstanding balance and will be available to cover shortfall in senior fees and Class A interest.

Furthermore, the transaction benefits from a commingling reserve, which the Servicer will fund in case of a commingling reserve rating trigger event (i.e., a Servicer long-term credit rating below BBB (low)). The commingling reserve required amount will be equal to 2.5% of the outstanding principal amount of the performing home loans. In addition, the seller has agreed to make a cash deposit following a set-off reserve rating trigger event (i.e., a seller credit long-term rating below BBB (low)). The set-off reserve required amount will be the aggregate amount equal to the sum for each home loan, of the minimum between (1) the aggregate amount exceeding EUR 100,000 and (2) the outstanding amount of such home loans. As of January 2025 payment date, both reserves were not funded.

BNPP acts as the account bank for the transaction. Based on the account bank reference rating of AA (which is one notch below Morningstar DBRS' Long Term Critical Obligations Rating of AA (high) on BNPP), 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 and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.
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 at 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 methodology applicable to the credit rating is: "Master European Structured Finance Surveillance Methodology" (4 February 2025), https://dbrs.morningstar.com/research/447080.

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 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 action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit 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 reports provided by France Titrisation, 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 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 transaction took place on 16 April 2024, when Morningstar DBRS confirmed its AA (high) (sf) credit rating on the Class A Notes, following transaction amendment.

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):

-- The base case PD and LGD of the current pool of loans for the Issuer are 2.4% and 13.0%, 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 (high) (sf)
-- 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD, expected credit rating of AA (high) (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 (low) (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: Pascale Kallas, Assistant Vice President
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 25 April 2022

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
Geschäftsführung: Detlef Scholz, Marta Zurita Bermejo
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.

-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196.
-- Master European Structured Finance Surveillance Methodology (4 February 2025),
https://dbrs.morningstar.com/research/447080.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.
-- 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.
-- European RMBS Insight Methodology (28 February 2025) and European Asset RMBS Insight Model version 10.1.0.0,
https://dbrs.morningstar.com/research/449129.

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/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.