Fitch Affirms CIF Assets 2001-1 Senior Notes at 'AAAsf'
EUR12,326.3m Class A affirmed at 'AAAsf'; Outlook Stable
EUR3,836.3m Class B: not rated
The transaction originally closed in 2001. New loans were purchased on a frequent basis though tap issuances up to October 2012. The notes are backed by a portfolio of French residential loans originated by 10 subsidiaries of Credit Immobilier de France Developpement (CIFD; A/Stable/F1). In November 2013, the European Commission signed off the CIFD group's orderly resolution plan, officially authorising CIFD to receive a global EUR28bn funding guarantee from the French state (of which EUR16bn was in respect of external liabilities and EUR12bn in respect of 3CIF's liabilities to CIF Euromortgage and CIF Assets 2001-1).
As of June 2015, the portfolio comprises 290,699 loans totalling EUR16,644.5m with an average current balance of EUR57,257. The portfolio has a weighted average (WA) original loan to value (LTV) of 94.9%, a WA current LTV of 76.9%, a WA debt-to-income (DTI) of 30.4%, a WA seasoning of 89 months and WA remaining term of 208 months. There has been no material deviation of the portfolio characteristics compared with our analysis in 2012.
KEY RATING DRIVERS
CIF Assets 2001-1's transaction structure was modified on 6 October 2015. The changes include:
(i) Lowering of the general reserve sizing, which now represents 0.5% of the notes' balance as of the restructuring date and amounts to EUR80.0m. This reserve can be used to cover liquidity and principal payments on class A notes.
(ii) Modification of the special recovery reserve, which can now be drawn to cover a shortfall of senior expenses payments, net swap payments and interest payments on class A notes exclusively. This reserve is dedicated to liquidity.
Default and Recovery Assumptions
Fitch analysed obligor credit risk by updating base case default and recovery assumptions and then stressing these assumptions according to the rating of the class A notes. Based on up-to-date historical default and recovery data available for origination and default vintages and taking into account the French economic outlook, the agency derived a rating default rate of 34.7% at 'AAAsf' and a rating recovery rate of 43.4% at 'AAAsf'.
Credit Support Commensurate with 'AAAsf' Stresses
Fitch's analysis showed that the available credit support following the amendments to the structure documentation remains commensurate with a 'AAAsf' rating for the class A notes. Credit enhancement for the class A notes (24.2%) is provided by the subordination of the class B notes and the general reserve.
Expected impact upon the note rating of increased defaults (class A):
Original rating: 'AAAsf'
Increase default base case by 10%: 'AAAsf'
Increase default base case by 25%: 'AA+sf'
Increase default base case by 50%: 'AAsf'
Expected impact upon the note rating of decreased recoveries (class A):
Original rating: 'AAAsf'
Reduce recovery base case by 10%: 'AAAsf'
Reduce recovery base case by 25%: 'AAAsf'
Reduce recovery base case by 50%: 'AA+sf'
Expected impact upon the note rating of increased defaults and decreased recoveries (class A):
Original rating: 'AAAsf'
Increase default base case by 10%; reduce recovery base case by 10%: 'AAAsf'
Increase default base case by 25% and reduce recovery base case by 25%: 'AA+sf'
Increase default base case 50% and reduce recovery base case by 50%: 'A-sf'
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch received the results of a third party assessment based on the asset portfolio and conducted a review of a small targeted sample of CIFD's loan files which indicated errors or missing data related to the property value information which can include notary or guarantee fees. Pari passu loans information was also not accurate in some cases. These findings were considered in this analysis by assuming a haircut to property purchase prices (division by 1.1x on the entire pool).
Overall and together with the assumptions referred to above, 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.
- Loan-by-loan data provided by CIF as at 30 June 2015
-Yearly origination volumes, monthly dynamic prepayment data, data and timing on cumulated recovery and data on cumulative defaults from 2002 to 2014, provided by CIF as at 31 December 2014.
The models below were used in the analysis. Click on the link for a description of the model.
- EMEA Cash Flow Model
REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see CIF Assets 2001-1 - Appendix, dated 31 October 2012 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.