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Dec 3 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed four French RMBS transactions originated by Electricite de France (EDF; A+/Stable/F1) and/or Gaz de France (GDF, not rated) and their subsidiaries as follows:
EUR39.8m Class A4 notes affirmed at ‘AAAsf’, Outlook Stable
EUR6.7m Class B notes affirmed at ‘Asf’, Outlook Stable
EUR86.1m Class A notes affirmed at ‘AAAsf’, Outlook Stable
EUR3.8m Class B notes affirmed at ‘BBBsf’, Outlook revised to Stable from
EUR110.1m Class A notes affirmed at ‘AAAsf’, Outlook Stable
EUR4.5m Class B notes affirmed at ‘Asf’; Outlook Stable
FCC Minotaure Compartment 2004-1
EUR127.6m Class A notes affirmed at ‘AAAsf’, Outlook Stable
EUR7.9m Class B notes affirmed at ‘BBBsf’, Outlook Stable
EUR0.3m Class C notes affirmed at ‘BBsf’; Outlook Stable
The affirmations reflect the transactions’ ongoing sound collateral performance and the credit support available to the notes. The revision of the Outlook to Stable from Negative on Loggias 2001-1’s class B notes is a result of the transaction entering accelerated amortisation (sequential amortisation with no excess spread released out of the structure) in September 2013. This eliminates the potential for any further decrease in the available OC.
In all the transactions, cumulative defaults have been lower than originally assumed to date. Electra 1 (the most seasoned transaction) has shown higher cumulative defaults to date - currently standing at 1.4% of its initial collateral balance - compared with the other transactions. As of the latest reporting period, Loggias 2001-1 reported defaults of 1.3%, while Loggias 2003-1 has cumulative defaults of 0.9%. FCC Minotaure 2004-1’s performance is in line with that of Loggias 2003-1, with cumulative defaults of 0.7% as of the same period.
For all transactions, the issuer purchased the underlying portfolio at a discount, thereby providing overcollateralisation (OC), with a view to diverting excess principal to interest payments during the transaction’s life. This was to ensure that the yield on the loans is sufficient to cover the interest due on the notes. Under normal amortisation (pro-rata amortisation of the rated notes), on each payment date, a portion of the effective principal collection amount was diverted as excess spread so that the actuarial yield of the portfolio (taking into account the OC) was maintained at its initial level. This mechanism means that the available OC diminishes over time, with the portfolio remaining life shortening until the transaction enters accelerated amortisation (sequential amortisation with no excess spread released out of the structure).
Loggias 2001-1 entered accelerated amortisation in September 2013. Electra 1 entered deferred amortisation (equivalent to accelerated amortisation) in November 2012 while Loggias 2003-1 and FCC Minotaure 2004-1 entered into early amortisation in November 2011 and October 2012, respectively.
Electra 1, Loggias 2001-1, Loggias 2003-1 and FCC Minotaure Compartment 2004-1 were set up to refinance portfolios of residential loans jointly granted by EDF, GDF and their subsidiaries to their employees. The majority of the loans do not benefit from any security (e.g. a mortgage or death/invalidity insurance) but loan instalments are deducted directly from the salaries of employees. Defaults are recorded in case of death, temporary or permanent disability of a borrower, and when over-indebtedness, bereavement and/or change in family status lead to an early termination. Any significant deviation in one of these factors would lead to negative rating actions.
Conversely, prepayments could be a driver of positive rating actions. Prepayments are positive for all transactions due to the negative excess spread carried out by the structures.