Press Release

DBRS Morningstar Confirms Rating on Master Credit Cards PASS Compartment France

Consumer Loans & Credit Cards

October 22, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) rating on the 2019-1, Class A2019-1 notes (the Notes) issued by Master Credit Cards PASS Compartment France (the Issuer).

The rating on the Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in May 2035.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of charge-off rates, principal payment rates, yield rates, and delinquencies, as of the September 2021 payment date;
-- No revolving termination events;
-- Current available credit enhancement to the Notes to cover the expected losses at the AAA (sf) rating level; and
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The transaction is a securitisation of revolving consumer credit agreements, originated and serviced by Carrefour Banque and granted to borrowers in France. Carrefour Banque is a captive entity owned by Carrefour Groupe (60%) and BNP Paribas Personal Finance (40%). Master Credit Cards PASS (the Fund) acts with respect to the Issuer. The Issuer, as the first compartment of the Fund, was established in November 2013 and has a programme issuance limit of EUR 1 billion. The receivables can be associated with a credit card or not and, under the credit agreement, the borrower may make standard drawings (Main Drawings) or benefit from Special Drawings, which may differ from the conditions applicable to Main Drawings.

The transaction is currently in its revolving period, scheduled to end on the payment date in June 2022, provided that no early amortisation events occur.

PORTFOLIO PERFORMANCE
As of the September 2021 payment date, agreements two to three months in arrears and loans 90+ days in arrears were both low at 0.1% and 0.0% of the outstanding portfolio balance, respectively, both down from 0.2% at last annual review. Receivables are classified as defaulted if they are more than seven months in arrears, the agreement has been accelerated, the borrower has filed a restructuring petition with an overindebtedness committee which has been accepted, the borrower has become insolvent, or the balance has been written off by the servicer. As per this definition, the annualised charge-off rate was low as of the September 2021 payment date at 0.7%, averaging 1.4% since closing. The monthly principal payment rate (MPPR) was 6.3% and averaged 5.7% since closing. The MPPR is calculated as all principal payments as a percentage of the opening performing principal balance. The annualised yield rate was 13.7% and averaged 13.9% since closing. As of the September 2021 payment date, the Special Drawings represented 0.0% of the outstanding portfolio balance, below the concentration limit of 10.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Based on the observed performance to date, DBRS Morningstar maintained its base case charge-off rate and base case yield rate of 6.50% and 13.00%, respectively, from closing. DBRS Morningstar increased its base case principal payment rate to 4.5% from 4.0% at the last annual review, given the improved performance since then.

CREDIT ENHANCEMENT
The credit enhancement consists of the junior notes. During the revolving period, the Notes benefit from a minimum of 6.0% of Class S Notes subordination, raising the minimum credit enhancement to 22.6%. During the programme revolving period, the Class S Notes rank pari passu with the Notes, provided that there is no debit balance on the portfolio deficiency ledger, and are fully subordinated during the programme amortisation period.

The transaction benefits from a general reserve, which covers senior expenses, swap payments, and interest on the Notes. The general reserve is funded to its target level of EUR 4.4 million, equal to 1.2% of the outstanding Notes balance, and is subject to a floor of 0.5% of the initial Notes balance.

The transaction also benefits from a commingling reserve, currently funded to its target level of EUR 3.5 million.

BNP Paribas Securities Services SCA (BNPSS) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNPSS, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Credit Agricole Corporate & Investment Bank (CA-CIB), Natixis S.A. (Natixis), and Société Générale, S.A. (SocGen) act as the swap counterparties for the transaction. DBRS Morningstar's private ratings on CA-CIB and Natixis as well as its public Long Term Critical Obligations Rating of AA on SocGen are all consistent with the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in DBRS Morningstar’s proprietary Excel-based cash flow engine.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate economic contraction, leading in some cases to increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many ABS transactions. The ratings are based on additional analysis to expected performance as a result of the global efforts to contain the spread of the coronavirus.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/384150/baseline-macroeconomic-scenarios-for-rated-sovereigns and https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

On 8 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated ABS transactions in Europe. For more details please see https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Master European Structured Finance Surveillance Methodology” (8 February 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: http://www.dbrsmorningstar.com/about/methodologies.

DBRS Morningstar 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 rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance 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://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for this rating include investor reports provided by Eurotitrisation and historical performance data provided by Carrefour Banque. The historical performance data were provided from January 2005 to June 2021 and contained on a monthly basis the following information: delinquencies, defaults, recoveries, and collections.

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

At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

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

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

The last rating action on this transaction took place on 23 October 2020, when DBRS Morningstar confirmed its rating on the Notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):
-- Base Case Charge-Off Rate: 6.5%
-- Base Case MPPR: 4.5%
-- Base Case Yield Rate: 13.0%

Scenario 1: A 25% decrease in the expected Principal Payment Rate.
Scenario 2: A 25% increase in the expected Charge-Off Rate.
Scenario 3: A 25% decrease in the expected Yield Rate.
Scenario 4: A 15% increase in the expected Charge-Off Rate, 15% decrease in the expected Principal Payment Rate and 15% decrease in the expected Yield Rate.

DBRS Morningstar concludes that the expected ratings on the Notes under the four stress scenarios are: AAA (sf), AA (high) (sf), AAA (sf), and AA (high) (sf).

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

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

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 1 October 2019

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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