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May 16 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Retail Consumer CP Germany 2011-1 UG’s EUR404m class A notes (XS0643705295): at ‘AAAsf’ with a Stable Outlook.
The transaction is a EUR600m unsecured consumer loan portfolio originated by CreditPlus Bank AG in Germany. The bank is a direct subsidiary of CA Consumer Finance, thus part of the Credit Agricole group (A/Stable/F1).
The affirmation reflects that performance to date has been better than expectations since the last review in June 2013, when the transaction entered its amortisation phase. Due to rapid amortisation of the portfolio and the strictly sequential waterfall, credit enhancement (CE) for the class A notes has built up quickly and is now at 40.5%. CE is provided by overcollateralisation as well as cash reserves, the amortisation amounts of which will be released to the principal waterfall.
All losses to date have been cleared using available excess spread, which is substantial in size. Cumulative losses, calculated including additional purchased receivables during the revolving period are 2.4%. Total delinquencies to date were 1.4% at the last reporting period in March 2013.
To reflect performance and amortisation to date, Fitch has revised the transaction lifetime base case default rate to 5% from 5.74% at close. This represents a remaining default rate of 6.5% of the current pool. Base case recovery expectations are unchanged at 38%. The revised default base case takes into account the better than expected performance as well as the high prepayment rates.
On 13 May 2014, Germany’s Federal Court of Justice ruled that credit claim handing fees (Kreditbearbeitungsgebuehren) in consumer loan contracts are invalid. Such fees were also agreed-upon in some of the contracts in the portfolio, giving borrowers a potential right to set-off such claims against moneys owed to the SPV. The originator ceased charging such fees in November 2012(for further information see ‘Fitch: ABS Set-Off Risk From German Handling Fee Ruling Mitigated’). Set-off risk would only materialise if and when Creditplus Bank defaults. Due to the substantial CE, the notes would still be commensurate with a ‘AAAsf’ rating, even in a combined stress scenario of deteriorating asset performance and materialisation of set-off risk.
The portfolio includes consumer loans typically without known financing purpose (personal loans, 92% of the portfolio) and loans granted to finance the purchase of different retail products (sales finance, 8%) Fitch notes that the portion of riskier personal loans has increased slightly from 88% since the last annual review in June 2013. However, the fraction is still lower than Fitch’s assumptions when it rated the transaction.
Expected impact upon the class A note rating of increased defaults and reduced recoveries:
Current rating: ‘AAAsf’; Increase default base case by 25%, reduce recovery base case by 25%: ‘AAAsf’.