December 13, 2013 / 3:16 PM / 4 years ago

Fitch Affirms CRH's Bonds at 'AAA'; Outlook Stable

(The following statement was released by the rating agency) PARIS/LONDON, December 13 (Fitch) Fitch Ratings has affirmed Caisse de Refinancement de l'Habitat (CRH)'s EUR56bn bonds at 'AAA' with a Stable Outlook. The affirmation follows the update of Fitch's covered bonds global master rating criteria on 4 September 2013, notably regarding the calculation of stressed recoveries on the bonds. The update of the criteria does not have a material impact on the breakeven level of over-collateralisation (OC) for the 'AAA' rating. KEY RATING DRIVERS The rating is based on Fitch credit view of the programme's main debtor of recourse, CRH, a Discontinuity-Cap (D-Cap) of 3 (moderate high) and 'AAA' breakeven OC of 26%. The Outlook on the bonds is Stable, reflecting the stable outlook for both the underlying shareholder banks and the French residential assets. The maximum achievable rating for the programme on a probability of default (PD) basis has been revised to 'AA' from 'AA+'. This is based on a D-Cap of 3 and Fitch's view on CRH's own creditworthiness. Fitch's view is based on the Issuer Default Ratings (IDR) of CRH's main shareholders, some of which were downgraded to 'A' from 'A+' as a result of the French sovereign downgrade in July 2013. The agency's 'AAA' breakeven OC of 26% allows for a further two-notch recovery uplift from the covered bond's rating on a PD basis. CRH's assets consist of promissory notes (billets de mobilisation, or BDMs), which perfectly match CRH's bonds and are secured over cover pools or French residential assets. In its analysis, Fitch relies on the lowest nominal OC observed over the past 12 months for the programme's main shareholder banks which, as of September 2013, was 32.5%. As there is no cross-collateralisation between the cover pools of the shareholder banks upon a default of one particular shareholder under its BDMs, Fitch looks at OC on an individual shareholder basis (although the exposure to the smallest contributor is disregarded, given that CRH's equity far exceeds the individual exposure). CRH requires each shareholder to supply at least 25% OC and may increase this percentage depending on the characteristics of the loans they pledge. Shareholders may either supply more collateral or could be asked to repurchase outstanding bonds by CRH, to enable them to reduce their BDMs and bring OC back in line. Fitch's breakeven OC will notably be affected by the profile of the cover assets relative to outstanding bonds, which can change over time, even in the absence of new issuances and therefore cannot be assumed to remain stable. The unchanged D-Cap is driven by the moderate high risk assessment of the liquidity gap and systemic risk. A moderate high risk assessment is also taken on the cover pool-specific alternative management components of the D-Cap analysis, while the systemic alternative management and the asset segregation remain unchanged at low. The privileged derivatives component also remains unchanged at very low as there are no swaps on the cover pool assets or the bonds. CRH is a French regulated credit institution set up in 1985, the sole purpose of which is to refinance residential loans originated by its shareholders. CRH's assets consist exclusively of BDMs issued by its shareholders. As of 1H13, CRH's capital was held by 12 French financial institutions, the five largest of which are: Credit Agricole (37.5%, A/Stable/F1), Credit Mutuel (32.7%, A+/Stable/F1), Societe Generale (13.6%, A/Stable/F1), BNP Paribas (9.7%, A+/Stable/F1) and BPCE (6.0%, A/Stable/F1). RATING SENSITIVITIES CRH's rating would be vulnerable to downgrade if any of the following occurs: (i) Fitch's view of CRH's creditworthiness, based on the IDRs of all its main shareholders, is lowered by one or more notches; (ii) the current D-Cap of 3 (moderate high) is revised down to 2 (high) or lower; (iii) the OC Fitch gives credit to drops below Fitch's breakeven level of 26% for the bonds' rating. Contact: Primary Analyst Will Rossiter Director +33 1 4429 9147 60 rue de Monceau 75008 Paris Committee Chairperson Cosme de Montpellier Senior Director +44 20 3530 1407 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: Additional information is available at Applicable criteria, 'Covered Bonds Rating Criteria', dated 4 September 2013; 'Counterparty Criteria for Structured Finance and Covered Bonds' and 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum' both dated 13 May 2013; 'EMEA RMBS Master Rating Criteria', dated 6 June 2013; 'EMEA Criteria Addendum - France', dated 17 June 2013, are available at Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here EMEA RMBS Master Rating Criteria here EMEA Criteria Addendum - Belgium here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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