Fitch Affirms AXA Bank Europe SCF's OF at 'AAA'; Outlook Stable
KEY RATING DRIVERS
The breakeven overcollateralisation (OC) for the 'AAA' rating of the OF is unchanged at 5%. This is driven by an asset disposal loss component of 7.3%, which reflects maturity mismatches between the assets and the liabilities and the haircuts applied to the sale of assets needed to repay maturing OF.
The cash flow valuation component is a negative 2.2%, reflecting the excess spread generated under the structure and the well-matched post-swap interest-rate position of the assets and liabilities, together with the gap between the stressed WA life of the assets (7.4 years) and the liabilities (4.8 years). The credit loss component of 0.8% is not a key driver of the OC as the cover pool is mainly composed of 'AAA' rated RMBS notes (90% of the cover pool), for which no expected loss is assumed in the OF analysis.
The Stable Outlook on the OF rating reflects that on AXA Bank Europe's Long-Term Issuer Default Rating and Fitch's view on the underlying Belgian and French residential loan assets backing the senior RMBS notes collateral and promissory note collateral, respectively.
The rating is based on AXA Bank Europe's IDR - which acts as reference IDR for the programme - an unchanged one-notch IDR uplift, a Discontinuity-Cap (D-Cap) uplift of four notches (moderate risk) and the 12.3% nominal OC that Fitch takes into account in its analysis, which provides more protection than the 5% 'AAA' breakeven OC.
The unchanged one-notch IDR uplift reflects the OF's exemption from bail-in and Fitch's view that France is a covered bond-intensive jurisdiction.
Under its cash flow analysis, Fitch assumed a 10bp 'AAA' servicing fee assumption (8bp in a 'AA' scenario) for the underlying senior RMBS note assets. Such assumption is not detailed under any of the agency's applicable criteria. The assumption reflects the relative ease of servicing such assets and represents a variation to Fitch's criteria.
The 'AAA' rating of the OF is vulnerable to a downgrade if any of the following occurs: (i) the reference Long-Term Issuer Default Rating (IDR) is downgraded to 'BBB' or below, (ii) the total number of notches represented by the IDR uplift and the D-Cap is reduced to two or lower.
Fitch's breakeven OC for the OF rating will be affected, among others, by the profile of the cover assets relative to outstanding OF, which can change over time, even in the absence of new issuance. Therefore the breakeven OC to maintain the OF rating cannot be assumed to remain stable over time.