OREANDA-NEWS. Fitch Ratings has affirmed FCT Evergreen HL1's (FCT Evergreen) EUR9bn note at 'AAA' with a Stable Outlook.

KEY RATING DRIVERS

The 'AAA' rating is based on Credit Agricole SA's (CA SA) Long-Term Issuer Default Rating (IDR) of 'A'/Positive, which acts as reference IDR for this programme; a revised IDR uplift of two notches from one notch previously; an unchanged Discontinuity Cap (D-Cap) of eight notches (minimal risk), driven by the pass-through feature of the notes; and the programme's maximum contractual asset percentage (AP) of 87.7%. The latter provides more protection than the updated 89.5% 'AAA' breakeven AP. The Stable Outlook reflects the great buffer against negative movements on the issuer's IDR.

Fitch's 'AAA' breakeven AP for the note decreased to 89.5% from 90.5%, based on a refined modelling assumption to determine the unhedged share of the portfolio. It is equivalent to a 11.7% breakeven overcollateralisation (OC) and considers a two-notch recovery uplift above a 'AA' tested rating on a probability of default basis.

The 11.7% 'AAA' breakeven OC is driven primarily by a credit loss component at 'AAA' of 11.9% resulting from the asset analysis. The positive cash flow valuation component (2.4%) reflects an interest rate mismatch due to OC being unhedged and being mainly composed of fixed-rate assets. Finally, an asset disposal loss component of 1.8% takes into consideration the pass-through constraint.

The unchanged D-Cap of eight notches remains driven by the pass-through amortisation of the outstanding notes, that would be triggered by an event of default of CA SA and by the presence of sufficient protection against interest rate interruption risk for the programme, leading to a minimal discontinuity risk assessment.

The revised IDR uplift of two notches reflects the additional protection provided by the senior unsecured debt of CA SA which is now in excess of 5% of total adjusted assets. It also reflects Fitch's view that resolution by means other than liquidation is likely for Credit Agricole (CA), the banking group to which CA SA belongs, which is classified as a global systemically important bank (G-SIB) by the Financial Stability Board (FSB).

RATING SENSITIVITIES

The rating of the note issued by FCT Evergreen HL1 is vulnerable to a downgrade if any of the following occurs: (i) Credit Agricole SA's (CA SA) Long-Term Issuer Default Rating (IDR) is downgraded by eight notches to 'B+' or lower; (ii) the sum of the IDR uplift and the Discontinuity Cap (D-Cap) falls to two notches or below.