Fitch Rates Matsuba 2016 B. V. 'AAA(EXP)sf'; Outlook Stable
Class A notes: 'AAA(EXP)sf'; Outlook Stable
Class B notes: Not rated
Class C notes: Not rated
The assignment of the final rating is contingent on the receipt of final documents conforming to information already received.
A presale report, describing Fitch's rating analysis in detail, will be available shortly at www. fitchratings. com.
The transaction is a securitisation of Dutch unsecured consumer loans originated by 11 subsidiaries of Credit Agricole Consumer Finance Nederland B. V. (CACF NL). The transaction has a one-year revolving period and the portfolio consists of amortising, fixed-rate loans, a small portion of which (10.4%) will reset their interest rate five years after their origination date (reset loans). The initial credit enhancement of the class A notes will be 16.25%, provided by over-collateralisation. Available excess spread and a reserve fund (through amounts released during amortisation) also provide credit enhancement, but are not included in the 16.25%.
KEY RATING DRIVERS
Amortising Loans, Growing Portfolio
This is CACF NL's first public securitisation of amortising loans: all previous deals securitised revolving credit lines. This change follows the market-wide trend of a shift in borrower preferences, in part steered by Dutch consumer regulation. CACF NL's amortising loan portfolio experienced high growth between 2009 and 2011 and is now growing rapidly again. The entire eligible portfolio will be securitised and comprise loans with an original term of up to 10 years (exactly 10 years for 63% of the pool).
Equal Portfolio Default Expectations
Fitch considered the historical performance as well as its macroeconomic expectations in its default base case of 4.5% for both fixed and reset loans, considering the homogeneous product and borrower characteristics. The agency modelled a stressed portfolio with 11% of reset loans and determined a 'AAAsf' default multiple of 5 for fixed loans and 5.5 for reset loans; the difference reflects the shorter available history.
Uncertainty from New Recovery Strategy
CACF NL's recovery strategy has shifted significantly over the past two years. In particular, sales of non-performing loans (NPL) were discontinued in early 2016: all delinquent loans are now worked out in-house. Fitch assigned the entire portfolio a lifetime recovery expectation of 30% and a median-to-high 'AAAsf' haircut of 55%, to account for new strategy not yet being fully reflected in the historical data.
Risk from Servicing Disruptions Mitigated
The transaction does not include a back-up servicer or an ad-hoc party to facilitate the servicer replacement following a relevant termination event. Fitch, however, believes that the issuer administrator will be able to perform this action. While the servicing disruption lasts, the amortising reserve fund - initially equally to 1% of class A and B notes - can cover payment interruption risk for almost eight months. Additionally, there are suitable alternative servicers in the market and the transaction's assets are standard.
Funded Reserve Mitigates Commingling Risk
Collections are received on the sellers' accounts and transferred to the issuer account monthly. Should they be lost before they are transferred, a funded, amortising commingling reserve - initially equal to 3.5% of the closing portfolio balance - can be used to make up for the loss.
Expected impact upon the note rating of increased defaults (class A):
Current rating: 'AAAsf'
Increase base case defaults by 10%: 'AA+sf'
Increase base case defaults by 25%: 'AAsf'
Increase base case defaults by 50%: 'AA-sf'
Expected impact upon the note rating of decreased recoveries (class A):
Current rating: 'AAAsf'
Reduce base case recovery by 10%: 'AAAsf'
Reduce base case recovery by 25%: 'AA+sf'
Reduce base case recovery by 50%: 'AA+sf'
Expected impact upon the note rating of increased defaults and decreased recoveries (class A):
Current rating: 'AAAsf'
Increase default base case by 10%; reduce recovery base case by 10%: 'AA+sf'
Increase default base case by 25%; reduce recovery base case by 25%: 'AAsf'
Increase default base case by 50%; reduce recovery base case by 50%: 'A+sf'
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis.
Fitch conducted a review of a small targeted sample of the originators' origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.
Overall, Fitch's assessment of the asset pool 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.
- Portfolio stratifications and loan-by-loan tape for the aggregate pool as well as fixed - and reset-loan sub-pools, as of 30 June 2016 and 31 August 2016, respectively.
- Set of historical data including data on originator books for client profiles with default probability up to 2%; in particular: (i) quarterly dynamic prepayments from 1Q09 to 2Q16; (ii) quarterly dynamic delinquencies by arrear bucket from 1Q06 to 2Q16; (iii) quarterly static defaults (under default definition of 121 days past due) from 1Q06 to 2Q16 both by number and amount; (iv) quarterly static recoveries from 1Q06 to 2Q16 (in this case including client profiles with default probability above 2% were not excluded).
- Additional historical information including loans extensions, forbearances, acceptance and rejection rates, and originations by default probability.