Press Release

DBRS Morningstar Assigns Provisional Rating to BPCE Consumer Loans FCT 2022

Consumer Loans & Credit Cards

July 19, 2022

DBRS Ratings GmbH (DBRS Morningstar) assigned a provisional rating of AAA (sf) to the Class A Notes to be issued by BPCE Consumer Loans FCT 2022 (the Issuer).

DBRS Morningstar did not assign a provisional rating to the Class B Notes also expected to be issued in this 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 maturity date.

The transaction represents the issuance of Class A and Class B Notes backed by a pool of fixed-rate, unsecured, and amortising consumer loans granted to individuals domiciled in France and serviced by participating Banque Populaire (BP) and Caisse d’Epargne (CE) (BPCE) banks (each the seller and servicer).

The rating is based on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement to support the projected expected net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay the notes according to the terms of the notes.
-- BPCE’s financial strength and its support to affiliate banks with respect to originations, underwriting, and servicing.
-- The operational risk review of BPCE, which DBRS Morningstar deems to be an acceptable servicer.
-- The transaction parties’ financial strength regarding their respective roles.
-- The credit quality, diversification of the collateral, and historical and projected performance of the originator’s portfolio.
-- DBRS Morningstar’s sovereign rating of the Republic of France at AA (high) with a Stable trend.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

TRANSACTION STRUCTURE
The transaction features a 43-month revolving period during which time the Issuer will purchase new receivables that the originator may offer, provided that certain conditions set out in the transaction documents are satisfied.

The transaction benefits from a liquidity reserve equal to 1% of the Class A Notes and Class B Notes balance funded collectively by each seller at closing that is available to cover the senior expense, swap cost, and interest shortfalls.

A commingling reserve facility is expected to be funded collectively by each seller if BPCE’s rating falls below “A”. The required amount is equal to one month of expected principal, interest, and prepayment collections.

COUNTERPARTIES
BPCE is the issuer account bank and specially dedicated account bank for the transaction. DBRS Morningstar has a private rating on BPCE, which meets the criteria to act in both capacities at closing. The downgrade provisions in the documentation are largely consistent with DBRS Morningstar’s criteria and the transaction will be monitored based on DBRS Morningstar’s rating of BPCE or its replacement.

Natixis is the swap counterparty for the transaction. DBRS Morningstar has a private rating on Natixis, which meets the criteria to act in such capacity at closing. 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 rating of Natixis or its replacement.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
BPCE has a long operating history of consumer loan lending. The performance to date has been stable based on a detailed vintage analysis. DBRS Morningstar also benchmarked the portfolio performance to comparable consumer loan portfolios in France and set the lifetime gross default and recovery assumptions at 3.1% and 34%, respectively.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) 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-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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. Due to the inclusion of a revolving period in the transaction, the analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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/399022/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for this rating include performance and portfolio data relating to the receivables provided by sellers through the arrangers, BPCE and Natixis:
-- Monthly static cumulative total gross defaults and cumulative recoveries from January 2014 to March 2022 split by each loan purpose and total;
-- Dynamic monthly prepayments, delinquencies, yield, defaults, recoveries, over-indebtedness from February 2014 to March 2022 split by each loan purpose and total.
-- Stratifications as of 30 April 2022.

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

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.

This 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.

Sensitivity Analysis: 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:
-- Expected Default Rate of 3.1%, a 25% and 50% increase
-- Expected Loss Given Default (LGD) of 66%, a 25% and 50% increase

Scenario 1: A 25% increase in the expected Default Rate.
Scenario 2: A 50% increase in the expected Default Rate.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected Default Rate and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected Default Rate and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected Default Rate and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected Default Rate and 50% increase in the expected LGD.

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios are:
Class A Notes: AA (high) (sf), AA (sf), AA (high) (sf), AA (sf), AA (low) (sf), AA (high) (sf), AA (sf), A (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: 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: David Lautier, Senior Vice President
Initial Rating Date: 19 July 2022

DBRS Ratings GmbH, Sucursal en España
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Tel. +34 (91) 903 6500

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at: https://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: 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.

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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