(The following statement was released by the rating agency)
Feb 5 - Fitch Ratings has affirmed FCT Red & Black French Small Business
2010-1, as follows:
EUR1,854.9m class A; 'AAAsf'; Outlook Stable
The affirmation reflects the transaction's ongoing sound performance and takes
into account the decision to waive the rating triggers relating to Societe
Generale (SG; 'A+'/Negative/'F1+') in its roles as swap counterparty until the
next payment date (as of 26 February 2013) as well as several amendments to the
transaction documentation which will come into force on the next payment date.
The transaction's performance has been stable since closing, with loans in
arrears over 90 days representing 0.5% of the outstanding portfolio balance.
Under the transaction documentation, the originator is able to substitute any
defaulted receivables during the transaction's revolving period and as such,
cumulative defaults since closing are equal to 0%, while substituted receivables
amount to 1.8% of the initial plus replenishment portfolio balance. The
transaction will revolve until November 2013.
On the next payment date, the transaction structure will be modified as follows:
(i) the swap agreement will be cancelled, (ii) the interest rate payable on the
class A notes will be capped so that it cannot exceed 3.69% and (iii) the
commingling reserve mechanism will be amended so that the amount standing in it
(funded in cash via a deposit from SG) will be reduced (equal to 1.76% of the
class A notes outstanding balance at any time) and will only be available to
cover liquidity shortfalls which may arise in case of a servicing disruption.
Fitch has analysed these changes. The agency believes that the commingling
reserve will remain adequately sized to mitigate liquidity risk in the
transaction. Moreover, an increase in the size of the reference portfolio and a
partial repayment of the class A notes will take place at the same date,
increasing the level of credit enhancement available to the class A notes to
42.9%. Fitch considers that this additional credit enhancement will adequately
compensate the combined effect of actions (i) and (ii) above and, furthermore,
will protect the transaction against any commingling or set-off risk.
In Fitch's view, SG remains eligible to perform its roles as swap counterparty.
SG's IDR was affirmed on 10 October 2012 and remains within the rating levels
defined as eligible in Fitch's counterparty criteria for 'AAAsf' rated notes.
Furthermore, Fitch notes that, if any of the envisaged amendments are not
implemented on the next payment date, the swap waiver would no longer apply.
FCT Red & Black Small Business 2010-1 is a securitisation of a loan (the SG
loan) made by Societe Anonyme de Credit a l'Industrie Francaise (CALIF) - a
member of the SG group - to SG. The loan benefits in turn from a financial
guarantee (remise en pleine propriete a titre de garantie) provided by SG under
the provisions of articles L.211-38 of the French Monetary Code.
This financial guarantee is backed by a reference portfolio of loans to French
small businesses and professionals originated by SG in France. The payment of
the notes matches the repayment of the SG loan, which in turn matches the
repayments received from the reference portfolio. According to the legal
structure, the cash flows received from the reference portfolio to repay the
notes are subject to certain limits, defined as "guaranteed obligations" under
the financial guarantee agreement.
(Caryn Trokie, New York Ratings Unit)