Fitch Affirms FCT Eridan 2010-01
OREANDA-NEWS. Fitch Ratings has affirmed FCT Eridan 2010-01 as follows:
EUR121.3m Class A (ISIN FR0010979385): affirmed at 'AAAsf'; Outlook Stable
EUR28.9m Class B (ISIN FR0010979393): affirmed at 'BB+sf'; Outlook Stable
FCT Eridan 2010-01 is a static cash flow SME CLO originated by BRED Banque Populaire (A/Stable/F1). At closing, the issuer used the note proceeds to purchase a EUR950m portfolio of secured and unsecured loans granted to French small and medium enterprises and self-employed individuals.
KEY RATING DRIVERS
The affirmations reflect the transaction's stable and sound performance over the last 12 months. The share of loans in arrears of more than 90 days decreased to 0.04% of the outstanding portfolio balance from 0.15% one year ago. Fitch has assumed an annual average probability of default of 2.5% based on the level of delinquencies observed in the portfolio over the preceding three years, a minimum annual average probability of default of 2% and a ratio between notional-based and obligor-based delinquencies of 1.2.
The notes have accumulated modest credit enhancement since closing in 2010 despite the portfolio having amortised to 22.9% of its original balance as of March 2016. The benign portfolio performance means that portfolio proceeds (with the exception of recoveries) are distributed pro rata to the notes, reducing the benefits of deleveraging. The transaction is designed to switch to fully sequential amortisation should portfolio performance deteriorate.
Despite the continuing amortisation of the pool, the portfolio remains fairly granular with the largest obligor and top 10 obligors representing respectively 0.8% and 6.6% of the outstanding balance. Obligors representing more than 0.5% of the pool have increased to 15 from seven over the last 12 months.
The class B notes' 'BB+sf' rating is capped in line with the agency 'Criteria for Rating Caps in Structured Finance Transactions'. The agency only considers 'Asf' or 'BBBsf' ratings for bonds that are not expected to incur deferrals or under the sequential and accelerated amortisation scenarios, the class B notes could experience temporary interest shortfalls as allowed by the transaction's documentation.
A 25% increase in the obligor default probability may lead to a downgrade of one notch on the class A notes while not impacting the rating of the class B notes.
A 25% reduction in expected recovery rates would not impact the ratings of the notes.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. 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 pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years 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 European Data Warehouse as at 31 December 2015
-Transaction reporting provided by France Titrisation as at 31 March 2016