(Repeat for additional subscribers)
Aug 5 (The following statement was released by the rating agency)
Fitch Ratings has affirmed BNP Paribas Public Sector
SCF's outstanding Obligation Foncieres (OF, French legislative covered bonds) at
'AA+'. The Outlook is Stable.
The affirmation follows the review of the Discontinuity Risk Assessment (D-Cap)
to High Risk (D-Cap of 2) from Moderate Risk (D-Cap of 4), due to the
reassessment of liquidity gaps and systemic risk component following a change in
the liquidity protection mechanism for the programme.
KEY RATING DRIVERS
The 'AA+' rating is based on BNP Paribas' (BNPP, 'A+'/Stable/'F1') Long-term
Issuer Default Rating (IDR) of 'A+', a Discontinuity Cap (D-Cap) of 2 (high
risk) and over-collateralisation (OC) of 10% that Fitch takes into account in
its analysis, which is above the 5.2% breakeven percentage for the 'AA+' rating.
This allows the OF to be rated 'AA' on a probability of default (PD) basis, plus
a one-notch uplift for recoveries to attain a 'AA+' rating. The Outlook on the
OF is stable, in line with that of the French and UK sovereigns, which are the
lowest-rated sovereigns represented in the pool.
The change in the D-Cap is due to a revision of the liquidity gap and systemic
risk component to 'High' from 'Moderate' following a shortening of the
pre-maturity test period. Fitch's previous analysis was notably based on a 12
months pre-maturity test under which BNP Paribas would have to include liquid
assets covering the bonds maturing in the following 12 months at the loss of
'F1+' by BNP Paribas. However, this commitment has been revised and changed to a
six months pre-maturity test. This would increase the discontinuity risk
following a default of BNP Paribas, as it shortens the time available to bridge
liquidity gaps to six months from 12 months. This could be challenging, given
the limited liquidity of export credit agencies (ECA) loans and the small number
of potential buyers for the ECA guaranteed loans.
BNP SCF's cover pool consists mainly of export and aircraft loans benefiting
from guarantees granted by ECA, with exposures to five sovereigns: France,
Germany, the UK, the US and Denmark. As an exception to its Global Rating
Criteria for Single and Multi-Name Credit-Linked Notes, the pool's credit risk
is analysed on a weakest link approach, with the default risk of the collateral
being equivalent to that of the lowest-rated sovereign (see 'Global Rating
Criteria for Single and Multi-Name Credit-Linked Notes', published 21 February
2013 at www.fitchratings.com).
The 'AA+' rating would be vulnerable to a downgrade, all else being equal, if
one of the following occurred: BNPP's IDR was downgraded to 'A-'; the D-Cap fell
to 0 (full discontinuity); the OC level decreased below 5.2%, which is the
minimum OC in line with the 'AA+' covered bonds rating; the cash held with BNPP
was considered as excessive, which could occur if this amount was more than what
is due on the bonds over the next 12 months, as per Fitch's counterparty
criteria; or if one of the sovereign exposures in the cover pool was downgraded