Fitch Affirms Caffil's OF at 'AA+' on Revised Breakeven Overcollateralisation

Thu Jun 12, 2014 11:05am EDT

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(The following statement was released by the rating agency) PARIS/LONDON, June 12 (Fitch) Fitch Ratings has affirmed Caisse Francaise de Financement Local's (Caffil) Obligations Foncieres (OF, French legislative covered bonds) at 'AA+' with Stable Outlook, following the agency's revision of the programme's breakeven overcollateralisation (OC) to 5% from 7.5% for the current rating. KEY RATING DRIVERS This revision follows the European Parliament and the Council of the European Union's approval of the Bank Recovery and Resolution Directive (BRRD) on 15 April 2014 and 6 May 2014 respectively and the agency's subsequent application of its Issuer Default Rating (IDR) uplift for the programme, as detailed in 'Fitch: Modest Positive Momentum from Covered Bonds Criteria Amendments', published on 12 May 2014 and available at www.fitchratings.com. The rating of the OF is based on the Long-Term IDR of Caffil's parent, Societe de Financement Local (SFIL; AA/Stable) and the IDR uplift of '1' assigned to the programme. This results in a floor for the rating of the OF on a probability of default (PD) basis at 'AA+', irrespective of the actual OC protection available to the OF. Caffil's Discontinuity-Cap (D-Cap) of 3 (moderate high) remains unchanged. In its analysis, Fitch relies on the minimum legislative 5% OC applicable to the programme, which is equal to the new breakeven OC for the 'AA+' rating. The agency notes that the 5% OC is unlikely to be sufficient for maintaining the 'AA+' rating of the OF, should the reference IDR of the programme be downgraded. RATING SENSITIVITY Caffil's cover pool includes exposures to French public-sector entities which represent approximately 70% of its balance sheet. In rating scenarios above the French sovereign's rating, Fitch assumes that any French sovereign assets, as well as a high proportion of French public sector entity exposures, default with low recovery assumptions. The rating of the OF would therefore be vulnerable to a downgrade of the French sovereign's IDR below its current 'AA+' rating. Contacts: Primary Analyst Will Rossiter Director +33 144 299 147 Fitch France 60 rue Monceau 75008 Paris Secondary Analyst Stanislas de Bazelaire Analyst +44 20 3530 1648 Committee Chairperson Cosme de Montpellier Senior Director +44 20 3530 1407 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; 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 14 May 2014; 'Asset Analysis Criteria for Covered Bonds of European Public Entities', dated 30 January 2013; 'Covered Bonds Rating Criteria - Public Sector Liquidity and Refinancing Stress Addendum', dated 7 February 2014 and 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds', dated 23 January 2014, all 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 Asset Analysis Criteria for Covered Bonds of European Public Entities here Covered Bonds Rating Criteria – Public Sector Liquidity and Refinancing Stress Addendum here Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds 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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