October 24, 2017 / 2:20 PM / a month ago

Fitch Takes Rating Actions on 3 EDF- & ENGIE-Originated Transactions

(The following statement was released by the rating agency) LA PAZ, October 24 (Fitch) Fitch Ratings has taken rating actions on three French residential transactions originated by Electricite de France (EDF, A-/Stable/F2) and ENGIE and their subsidiaries as follows: Loggias 2001-1 Class A notes affirmed at 'AAAsf', Outlook Stable Class B notes upgraded to 'AAsf' from 'BBBsf'; Outlook Stable Loggias 2003-1 Class A notes affirmed at 'AAAsf', Outlook Stable Class B notes affirmed at 'AAAsf', Outlook Stable FCC Minotaure Compartment 2004-1 Class A notes affirmed at 'AAAsf', Outlook Stable Class B notes upgraded to 'Asf' from 'BBBsf'; Outlook Stable Class C notes upgraded to 'Asf' from 'BBBsf'; Outlook Stable The asset portfolios comprise residential loans originated to employees of EDF and ENGIE (formerly Gaz De France). The transactions were originated between 2001 and 2004. Unlike in most French RMBS transactions, the majority of the loans do not benefit from any security or from any insurance. The weighted average remaining life of the assets is lower than four years. All the borrowers had the status of IEG (Industries Electriques et Gazieres) employees which forbids any redundancy, except in case of serious misconduct. KEY RATING DRIVERS Sound Asset Performance Loggias 2001, which is the most seasoned deal, had a cumulative default rate of 1.48% of the initial pool balance as of end-July 2017. Loggias 2003 and FCC Minotaure reported cumulative defaults of 1.11% and 0.92% respectively with 1.09% and 0.92% a year ago. As of end-July 2017, the portfolio had reached 4.9% of its initial size for Loggias 2001, 9.6% for Loggias 2003 and 19.0% for FCC Minotaure. Sequential Note Redemption All transactions have now moved to accelerated amortisation, hence all the available funds are now used to pay in priority senior expenses, interest on the notes and then principal due on the most senior notes until full redemption. Counterparty Exposure Documented rating triggers have been breached. These triggers relate to the ratings of the interest rate swap counterparty, as well as to the ratings of the account bank for the Loggias 2001 transaction. However, these counterparties have a current rating that is consistent with Fitch's Counterparty Criteria for Structured Finance and Covered Bonds. In the case of the account bank, Fitch believes that the management company would proceed to its replacement to protect the interests of the noteholders in case of further downgrade of the account bank. Under the swap agreement, the issuer pays a 4.9% fixed interest rate and receives one-month Euribor. A default of the swap counterparty in the coming months would result in the issuer paying -one-month Euribor instead of 4.9%. In light of the current rating of the interest rate swap counterparty, the low interest rate environment and the short remaining life of the assets, any possible risk related to interest rate is considered as sufficiently remote. Tail Risk Mitigated A specific focus has been given to tail risk for these deals. The Tail End Concentration Risk tests detailed in the French Residential Loans EDF Engie Bespoke Rating Criteria have been applied. Fitch deems the current overcollateralisation (OC) for each transaction sufficient to cover the corresponding tail risk. RATING SENSITIVITIES Although these transactions are not sensitive to real estate and macro-economic changes, defaults and consequently losses are directly dependent on death, disability and termination of loan contracts. An increase in any of these factors could result in faster OC erosion and negative rating actions. Because the ratings of Loggias 2001's notes are exposed to the account bank counterparty's ratings, any downgrade of its rating could influence a similar movement on the tranches' ratings in case it is not replaced. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis. -Loan-by-loan data provided by France Titrisation as at 30 July 2017 -Transaction reporting provided by France Titrisation as at 30 July 2017 MODELS Fitch developed specific models that were used for the analysis of these transactions. Contacts: Lead Surveillance Analyst Damien Zarowsky Associate Director +33 1 44 29 91 39 Fitch France S.A.S. 60 rue de Monceau 75008 Paris Committee Chairperson Emmanuelle Ricordeau Senior Director +33 1 44 29 91 48 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria French Residential Loans EDF Engie Bespoke Rating Criteria (pub. 07 Jul 2017) here Global Structured Finance Rating Criteria (pub. 03 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 23 May 2017) here Structured Finance and Covered Bonds Country Risk Rating Criteria (pub. 18 Sep 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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