Fitch Affirms BNP Paribas Home Loan SFH's Covered Bonds at 'AAA'; Outlook Stable

Thu Apr 17, 2014 10:37am EDT

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(The following statement was released by the rating agency) LONDON/PARIS, April 17 (Fitch) Fitch Ratings has affirmed BNP Paribas Home Loan SFH's (BNPP HL SFH) EUR24.6bn mortgage covered bonds (Obligations de Financement de l'Habitat, OFH) at 'AAA'. The Outlook is Stable. KEY RATING DRIVERS The affirmation follows a revision of the 'AAA' breakeven asset percentage (AP) to 87% from 81.8%. The increase in breakeven AP for this programme results from an improved maturity match, with the difference between the residual maturity of the residential loan portfolio and the residual maturity of the outstanding bonds having reduced to 2.3 years from 3 years. The increase in the breakeven AP also reflects Fitch's updated refinancing spreads assumptions for French residential loans, which have been lowered to 240bps per annum in a 'AAA' rating scenario from about 250bps (see "Fitch Publishes Covered Bond Mortgage Liquidity and Refinancing Stress Addendum", dated 4 February 2014). Finally, the change reflects a more precise modelling of time-subordinated recoveries on OFH assumed to be in default, whereas previously the AP supporting a timely payment of OFH in a 'AAA' scenario was used as a proxy for the level of AP corresponding to full recovery in a 'AAA' scenario (see 'Fitch Announces Enhancements to Recovery Uplift in Covered Bonds Ratings', dated 30 April 2013 at www.fitchratings.com). The 'AAA' breakeven AP is now driven by Fitch's stressed price cap of 87% applied in the modelling of asset sales to bridge maturity mismatches between the cover pool and the covered bonds in the first periods after an assumed enforcement of the security against the cover assets. Although refinancing in later periods could take place at a less onerous cost, the programme's Selected Asset Requirement Amount (SARA) clause aligns the breakeven AP for a given rating to the lowest sale price over the lifetime of the programme in the corresponding rating scenario. The 80% AP committed by the issuer provides more protection than the revised 'AAA' breakeven AP of 87% and supports a rating on a probability of default (PD) basis of 'AAA' for the covered bonds. The rating is further based on the Long-term Issuer Default Rating (IDR) of BNP Paribas (BNPP, A+/Stable/a+), an IDR uplift of '2' and an unchanged Discontinuity-Cap (D-Cap) of '4' (moderate). As of February 2014, the residential loan portfolio securing the covered bonds amounted to EUR32.2bn, of which EUR28.6bn (89%) was originated by BNPP French retail network (BDDF) and EUR3.6bn (11%) was originated by BNP Paribas Personal Finance (BNPP PF, a specialised lender 100%-owned by BNPP). All the properties are located in France. Eighty per cent of the pool benefits from a guarantee by Credit Logement and 20% is secured by a mortgage. RATING SENSITIVITIES The 'AAA' rating of the OFH is vulnerable to a downgrade if any of the following occurs: (i) BNPP's IDR is downgraded by five notches to 'BBB-' or lower; (ii) the number of notches represented by the IDR uplift and the D-Cap is reduced to one or below or (iii) the level of AP that Fitch considers in its analysis increases above Fitch's AAA breakeven AP of 87%. Contact: Primary Analyst Anastasiya Kapustina Analyst +44 203 530 1516 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Stanislas de Bazelaire Analyst +44 (0)203 530 1648 Committee Chairperson Emmanuelle Ricordeau Senior Director +33 1 44 29 91 48 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: christian.giesen@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 March 2014; 'Counterparty Criteria for Structured Finance and Covered Bonds' and 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum', both dated 13 May 2013; 'EMEA RMBS Master Rating Criteria', dated 6 June 2013; 'EMEA Criteria Addendum France', dated 17 June 2013; 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds', dated 23 January 2014; 'Covered Bonds Rating Criteria - Mortgage Liquidity and Refinancing Stress Addendum', dated 4 February 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here EMEA RMBS Master Rating Criteria here EMEA Criteria Addendum – France here Criteria for Interest Rate Stresses in Structured Finance Transactions here Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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