Dec 19 - Fitch Ratings has affirmed FCT Blue Star Guaranteed Home Loans'
(Blue Star) EUR3bn of outstanding notes at 'AAA'; Outlook Stable.
The rating is based on Credit du Nord's (CN, 'A+'/Negative/'F1+') Long-term
Issuer Default Rating (IDR) of 'A+', which acts as the main debtor of recourse
under the secured advances, a Discontinuity-Cap (D-Cap) of 4 (moderate) and a
level of asset percentage (AP) that Fitch gives credit to of 87.0%.
In terms of sensitivity of the notes' rating, the 'AAA' rating would be
vulnerable to downgrade, all else being equal, if one of the following occurred:
CN's IDR was downgraded to 'BBB+' or below, the AP increased above 87% which is
the updated breakeven percentage for a 'AAA' rating, or the D-Cap decreased to 1
or 0. Given that, all else being equal, a downgrade of CN's IDR by one notch
would not result in a corresponding downgrade on the notes, the Outlook on Blue
Star's notes remains at Stable, despite the fact that the Outlook on CN's IDR is
Fitch gives credit to the 87.0% AP which the issuer commits to maintaining as
part of the programme's monthly Asset Coverage Test (ACT). This 87.0% AP limits
the rating on a probability-of-default basis to 'AA+' and supports a 'AAA'
rating factoring recoveries given default.
Overall, the Fitch breakeven AP has decreased to 87% compared to the previous
88% as a consequence of the agency applying updated refinancing cost assumptions
for cover pools of French home loans (see "Covered Bonds Rating Criteria -
Mortgage Liquidity & Refinance Stress Addendum", dated 14 November 2012 on
The breakeven AP will be affected, among other factors, by the profile of the
collateral assets relative to outstanding notes, which can change over time,
even in the absence of new issuances. Therefore it cannot be assumed that the
current breakeven AP will remain stable.
The D-Cap of moderate is based on Fitch's assessment of the segregation of the
collateral pool from the bankruptcy estate of CN as satisfactory, despite a risk
that debtors might set-off their deposits in the event of CN's insolvency; it is
also based on Blue Star's ability to overcome liquidity gaps via a 12-month
extendible maturity on the notes; finally, the agency deems the transition to an
alternative manager post an assumed default of CN as feasible, based on an
analysis of CN's systems and processes.
As of mid-November 2012, the cover pool consisted of 46,377 French residential
loans granted by CN or its subsidiaries, with a weighted-average (WA) original
loan-to-value ratio of 87.9%. According to the eligibility criteria, all loans
must be guaranteed by Credit Logement (CL). Fitch took into account the
creditworthiness of CL and calculated an expected loss of approximately 8.2% on
the collateral pool under a 'AAA' stress scenario.
78.5% of the loans are fixed rate, whereas all notes pay a floating rate of
interest. The issuer has entered into an asset swap with an intra-group
counterparty (Societe Generale, (SG; 'A+'/Negative/'F1+')) to hedge the interest
rate risk between the fixed rate loans in the cover pool and the floating rate
notes. There are no currency mismatches.
The cover pool's weighted-average residual life is 7.7 years, compared to 1.7
years for the notes, as of mid-November 2012. The agency modelled the maturity
mismatch between the cover assets and outstanding notes and assumed under its
stress scenario that assets will have to be liquidated at a discount to par when
needed to repay maturing notes.
Blue Star is a French securitisation fund (Fond Commun de Titrisation; FCT),
established for the purpose of refinancing French residential loans granted by
CN or its subsidiaries, and guaranteed by CL. It is co-owned by a management
company (Paris Titrisation) and a custodian (SG). It is governed by the
provisions of the French Monetary and Financial Code (art. L.214-43 et seq.) and
the regulations entered into between the management company and the custodian.
Additional information is available at www.fitchratings.com.
The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.
Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 September 2012,
'Covered Bonds Rating Criteria - Mortgage Liquidity & Refinance Stress
Addendum', dated 14 November 2012, 'Covered Bonds Counterparty Criteria', dated
25 July 2012, 'EMEA Residential Mortgage Loss Criteria', dated 07 June 2012,
'EMEA Criteria Addendum - France', dated 27 July 2012', are available on
Applicable Criteria and Related Research:
Covered Bonds Rating Criteria - Amended
Covered Bonds Rating Criteria - Mortgage Liquidity & Refinance Stress Addendum
Covered Bonds Counterparty Criteria
EMEA Residential Mortgage Loss Criteria
EMEA Criteria Addendum - France - Mortgage and Cashflow Assumptions