Feb 13 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Credit Agricole Home Loan SFH's (CA HL SFH) Obligations de Financement de l'Habitat (OFH) at 'AAA'. The Outlook is Stable.
The affirmation follows Fitch's review of the breakeven asset percentage (AP) for OFH rating, which has been revised to 93% from 90%.
KEY RATING DRIVERS
The OFH rating is based on the Long-term Issuer Default Rating (IDR) of the programme's main debtor of recourse and reference IDR, Credit Agricole S.A. (CASA; A/Stable/F1), an unchanged Discontinuity Cap (D-Cap) of 3 (moderate high) and the 71.3% AP which Fitch takes into account in its analysis and corresponds to the highest observed AP over the last 12 months. This provides more protection than Fitch 93% AAA breakeven AP.
The increase in the breakeven AP was driven in part by Fitch's updated refinancing spread assumptions for French residential loan pools (see "Fitch's Mortgage Covered Bond Refinancing Stresses - Excel File" for details), as well as the updated maturity profile of the cover assets relative to the outstanding bonds, which can change over time. As such, the breakeven AP for the OFH rating cannot be assumed to remain stable over time.
The D-Cap of 3 is driven by Fitch's moderate high risk assessment of the liquidity gaps and systemic risk component, which reflects the pre-maturity test outlined under the programme documentation and covers principal payments due on the OFH over the next nine months on a rolling basis. The pre-maturity test was triggered following the downgrade of CASA's Short-term IDR to 'F1' from 'F1+' in July 2013, with the cash amount due under the pre-maturity test currently fully funded.
The moderate high risk assessment of the cover pool-specific alternative management component of the D-Cap is driven by the fact that the underlying asset (residential mortgage loans) are originated by 39 'caisses regionales' (local banks) and Le Credit Lyonnais, which each use internally developed IT systems. This is regarded by Fitch as having the potential to delay the gathering of information should an alternative manager be appointed post-default of CASA.
As of end-December 2013, the underlying assets were made up of residential mortgage loans with an aggregate outstanding balance of EUR34.3bn, with a weighted average (WA) residual life of 7.5 years. The OFH's WA residual life is of 5.5 years.
THE OFH rating is vulnerable to a downgrade if any of the following occurs: (i) the reference IDR is downgraded by one notch or more; (ii) the current D-Cap is revised downwards to 2 (high), 1 (very high) or 0 (full Discontinuity); (iii) the AP increases above Fitch's 93% breakeven AP for the OFH rating.