DBRS Morningstar Assigns Provisional Rating of AAA (sf) to Class A2022-1 Notes of Master Credit Cards PASS Compartment France

DBRS Ratings GmbH (DBRS Morningstar) assigned a provisional rating of AAA (sf) to the Class A2022-1 Notes (Class A Notes) to be issued by Master Credit Cards PASS Compartment France (the Issuer).

DBRS Morningstar did not assign a rating to the Class B2022-1 Notes also expected to be issued in the transaction.

The provisional rating is based on information provided to DBRS Morningstar by the Issuer and its agents as of the date of this press release. This rating will be finalised upon a review of the final version of the transaction documents and of the relevant opinions. If the information therein were substantially different, DBRS Morningstar may assign a different final rating to the notes.

The rating of the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date.

The transaction is the note series 2022-1 of the Issuer supported by a pool of unsecured receivables from drawings made by individuals under revolving consumer credit agreements originated and serviced by Carrefour Banque (the seller) in France.

The rating is based on the following analytical considerations:
-- The transaction's capital structure, including form and sufficiency of available credit enhancement;
-- Credit enhancement levels are sufficient to support DBRS’s expected charge-off, payment, and yield rates under various stress scenarios;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay the Class A Notes according to the terms of the notes;
-- DBRS Morningstar’s operational risk review of Carrefour Banque with regard to originations, and underwriting and servicing;
-- The transaction parties’ financial strength with regard to their respective roles;
-- The credit quality of the collateral and historical and projected performance of the seller's portfolio;
-- DBRS Morningstar's sovereign rating of the Republic of France, currently at AA (high) with a Stable trend; and
-- The expected consistency of the transaction's legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

TRANSACTION STRUCTURE
The transaction includes an amortising liquidity reserve funded by the seller at closing, which is available to the Issuer where the interest collections are not sufficient to cover the shortfalls in senior expenses, swap costs, and interest on the Class A Notes.

The transaction also benefits from the curing of principal deficiencies in the interest waterfalls before excess spread is released out of the structure. Principal collections may also be used to cover the remaining shortfall after liquidity reserve.

The interest rate risk for the transaction is expected to be largely mitigated by an interest rate swap.

COUNTERPARTIES
BNP PARIBAS Securities Services is the account bank for the transaction. DBRS Morningstar has a private rating on BNP PARIBAS Securities Services. The transaction documents contain downgrade provisions relating to the account bank consistent with DBRS Morningstar’s criteria.

Crédit Agricole Corporate and Investment Bank, Natixis S.A. and Société Générale S.A. are the swap counterparties for the transaction. DBRS Morningstar has a Long-Term Issuer Rating of A (high) on Société Générale S.A. and private ratings on Crédit Agricole Corporate and Investment Bank and Natixis S.A., all of which meet its criteria to act in such capacity. The downgrade provisions in the swap documentation are largely consistent with DBRS Morningstar’s criteria and the transaction will be monitored based on DBRS Morningstar’s ratings or their replacement(s).

PORTFOLIO ASSUMPTIONS
The reported historical charge-off rates show noticeable volatility, except for the few years prior to the pandemic outbreak in 2020. Based on the trends of historical data, DBRS Morningstar maintained the expected charge-off rate at 6.5%.

The most recent data shows the payment rates are similar to historical levels after experiencing some declines in early 2020 during the initial pandemic outbreak. Based on the trends of historical data, DBRS Morningstar maintained the expected monthly principal payment rate at 4.5%.

The portfolio yield was stable over the reported period, largely driven by the legislative usury rate in France. Based on the observed trend, DBRS Morningstar maintained the expected yield at 13%.

The cumulative recovery rates are also stable over the reported period. Based on the quality of historical data and trends of accelerated and over-indebted loans, DBRS Morningstar set the expected recovery rate at 35.5%, which is subject to 30% reduction at AAA (sf) level.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating European Consumer and Commercial Asset-Backed Securitisations” (29 October 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://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.

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” methodology 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 the following data provided by the arranger, Crédit Agricole Corporate and Investment Bank:
-- Monthly historical dynamic data from January 2005 to March 2022 for the entire managed portfolio of origination, receivables balances, payment rates, yield, purchase rates, delinquencies, and charge-off rates.
-- Monthly static cumulative recovery data for accelerated contracts from January 2007 to March 2022.
-- Monthly static cumulative recovery data for over-indebtedness contracts from January 2003 to March 2022.
-- Stratification tables in relation to the collateral pool as of 30 April 2022.

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

DBRS Morningstar was not 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 rating concerns an expected-to-be-issued new financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

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 to the parameters used to determine the rating:

-- Expected Charge-Off Rate: 6.5%
-- Expected Monthly Principal Payment Rate: 4.5%
-- Expected Yield Rate: 13%

Scenario 1: 25% increase on the expected charge-off rate
Scenario 2: 25% decrease on the expected monthly principal payment rate
Scenario 3: 25% decrease on the expected yield rate
Scenario 4: 15% increase on the expected charge-off rate, 15% decrease on the expected monthly principal payment rate and 15% decrease on the expected yield rate

DBRS concludes that the expected ratings of the Class A Notes under the four stress scenarios are:
-- AAA (sf) for all scenarios

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://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: Roberto Perez, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Head of European Structured Finance
Initial Rating Date: 25 May 2022

DBRS Ratings GmbH
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Rating European Consumer and Commercial Asset Backed Securitisations (29 October 2021),
https://www.dbrsmorningstar.com/research/387042/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (19 May 2022),
https://www.dbrsmorningstar.com/research/397034/rating-european-structured-finance-transactions-methodology.
-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021), https://www.dbrsmorningstar.com/research/384512/operational-risk-assessment-for-european-structured-finance-originators.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021), https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021),
https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),
https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://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.