OREANDA-NEWS. Fitch Ratings has affirmed Autonoria Compartment Autonoria 2014 class A notes at 'AAAsf' with a Stable Outlook.

On 25 July 2016, there was a EUR527.9m class A notes tap issuance (as well as EUR129.1m on the class B notes) so that the new class A notes amount to EUR869.0m (EUR252.3m of class B notes) and the revolving period was extended. The tap issuances were used to purchase an additional EUR657.0m portfolio of receivables.

The transaction, which initially closed in November 2014, is a securitisation of French auto loan receivables originated in France by BNP Paribas Personal Finance (BNPP PF), a 100% subsidiary of BNP Paribas (A+/Stable/F1). The portfolio consists of loans to individuals for the financing of new and used automobiles, motorcycles and recreational vehicles (motor homes). All the loans bear a fixed interest rate and are amortising, with constant monthly instalments.

KEY RATING DRIVERS

Extension of the Revolving Period

From 25 July 2016, the transaction will start revolving for three additional years. The portfolio will then become static and amortise. The initial 15-month revolving period ended in March 2016. The early amortisation triggers, along with eligibility criteria, portfolio limits and available credit enhancement, adequately reduce the risk from the revolving period. Fitch has analysed potential shifts in the portfolio and modelled a stressed portfolio distribution with a migration towards more risky loans.

Updated Default and Recovery Assumptions

To update its base case default and recovery assumptions and rating stresses, Fitch has taken into account the extended length of the revolving period as well as the latest historical performance data provided by the originator for the total auto loan book as well as observed performance to date. Fitch arrived at a rating default rate of 28.3% at 'AAAsf' and a rating recovery rate of 16.5% at 'AAAsf', resulting in a 'AAAsf' loss rate assumption of 23.6%. These assumptions are based on an updated stressed portfolio composition, taking into account the amended portfolio replenishment criteria whereby used vehicles can represent up to 70% of the portfolio. As such, Fitch's stressed portfolio is composed 27% of new cars, 70% of used cars and 3% of motorcycles.

The agency increased the base case default assumptions for new cars to 4.0% (from 3.0% previously) and for used cars to 5.5% (from 5.0% previously) while maintaining the base case for motorcycles at 7.0%, resulting in a 5.1% assumption for the stressed portfolio (4.3% previously). In addition, we increased rating scenario multipliers to 5.5x at 'AAAsf' (from 5.25x previously). These increases reflect the recent volatility observed in BNPP PF default data with younger vintages showing higher defaults in tendency as well as the long revolving period of three years. Recovery assumptions are unchanged. In addition, Fitch increased the base case prepayment rate to 19% (from 17% previously) to reflect the slightly higher prepayment rate observed at the transaction level compared with the historical data provided by BNPP PF for its total auto loan book.

Sufficient Credit Support

Fitch has taken into account the updated default and recovery assumptions together with the increased subordination ratio (to 22.5% from 22.0% at closing), the increased general reserve balance (5% of the initial notes balance, increased from 1.5%) and the lower portfolio limit on the minimum weighted-average interest rate of the receivables (3.0% compared with 4.5% previously). The analysis showed that the updated level of credit support is commensurate with a 'AAAsf' rating for the class A notes.

Credit enhancement for the class A notes is provided by overcollateralisation financed by subordinated class B notes. The general reserve also provides credit enhancement. It is split between a liquidity ledger (1% of the outstanding notes balance) and non-liquidity ledger (equal to the difference between 5% of the initial notes balance and 1% of the outstanding notes balance). The non-liquidity ledger provides credit enhancement to the extent it can be used to cover principal deficiencies and will be fully released to repay the notes upon the occurrence of an accelerated redemption event. This would be triggered, for instance if defaults cannot be covered by excess spread, and terminates the revolving period followed by accelerated note redemption. The liquidity ledger provides credit enhancement to the extent that amortising amounts are also available to cure principal deficiencies.

If the balance of the general reserve is higher than the balance of the class A notes, the general reserve will be released to repay class A notes.

Counterparty Risks Mitigated

The replacement language associated with the account bank (BNP Paribas Securities Services, A+/Stable/F1) and the specially dedicated account bank (BNP Paribas Securities Services) has been amended and now refers only to a Long-Term Issuer Default Rating (IDR) of 'A' (previously, the replacement language referred to a Long-Term IDR of at least 'A' and a Short-Term IDR of at least 'F1'). This new language is consistent with Fitch's Counterparty Criteria for Structured Finance and Covered Bonds, dated 18 July 2016.

Similarly, the commingling reserve posting language has been amended. This reserve will be posted if the servicer's majority shareholder (BNP Paribas) is downgraded below 'A' and 'F1' (from 'A' or 'F1' previously). This is consistent with Fitch's Counterparty Criteria for Structured Finance and Covered Bonds. In addition, the commingling reserve has been increased to represent the sum of 4% of the outstanding receivables and EUR10m. Fitch considers this reserve, together with the daily sweep of collections from the servicer accounts to the specially dedicated account, as adequately addressing commingling risk in the transaction.

Fitch considers that payment interruption risk is sufficiently covered by the liquidity ledger of the general reserve, which will be sufficient to cover several months of senior costs and interest on the class A notes.

Additional Transaction Amendments

As of 25 July 2016, the following further amendments have been made:

- The revolving period termination events have been amended. The level of the delinquency ratio trigger (loans in arrears by more than three months) has been lowered to 2.0% (from 2.5% previously) and the cumulative default ratio trigger (ratio between defaulted loans since closing in 2014 and the portfolio balance as of 25 July 2016) now refers to three levels for the first, second and third year of the revolving period with levels of 2.5%, 4.25% and 6.0% respectively. The excess spread trigger is now calculated monthly (and no longer as a three month average).

- The issuer has entered into a cash swap (with BNPP PF, with a guarantee provided by BNP Paribas) to hedge the interest rate risk on the revenues from the cash held on its accounts. Under the cash swap, the issuer pays the interest received on the issuer's funds and the swap counterparty returns a fixed rate.

- The mandatory partial redemption event has been slightly amended so that if the ratio between the outstanding balance of the receivables and the outstanding balance of the notes is less than 87.5% (from 90% previously) during the revolving period, the class A notes will be partially amortised. This means that the cash held in the structure during the revolving period will not exceed 12.5% of the notes balance on a payment date.

- Under the transaction documentation, the issuer is entitled to re-assign defaulted receivables (i. e. receivables that have been accelerated or have become due and payable) to the seller. The repurchase of these receivables is now the maximum between (i) the outstanding principal balance of the receivables minus the expected loss given default (as computed by the servicer) and (ii) 25% of the outstanding principal balance of the receivables.

- Lastly, the payment frequency during the revolving period and the normal redemption period has been changed to quarterly from monthly. The payment frequency during the accelerated redemption period is unchanged (monthly).

Potential Impact Of Permitted Variations

The servicer may proceed with amicable or commercial renegotiations of any receivable, provided that it does not result in a breach of eligibility criteria. Fitch understands that this is a standard practice for servicers in order to facilitate the repayment of borrowers in difficulty during an amicable recovery process, among others. However, it also provides a tool to pilot the revolving period termination triggers (delinquency trigger or cumulative default trigger), avoiding an early amortisation of the transaction in case of performance deterioration. Fitch considers this risk as sufficiently remote because the servicer would need to renegotiate the contracts of all its delinquent loans under management and not only securitised loans since the status of a loan as securitised or not is not known to the servicing teams. Given the size of the transaction in relation to BNPP PF's total loan book, we consider this situation unlikely. In addition, this may constitute a breach of the servicing agreement.

RATING SENSITIVITIES

Expected impact on the class A notes rating of increased defaults:

Increase base case defaults by 10%: 'AA+sf'

Increase base case defaults by 25%: 'AA+sf'

Increase base case defaults by 50%: 'AA-sf'

Expected impact on the class A notes rating of decreased recoveries:

Reduce base case recovery by 10%: 'AAAsf'

Reduce base case recovery by 25%: 'AAAsf'

Reduce base case recovery by 50%: 'AAAsf'

Expected impact on the class A notes rating of increased defaults and decreased recoveries:

Increase default base case by 10%; reduce recovery base case by 10%: 'AA+sf'

Increase default base case by 25% and reduce recovery base case by 25%: 'AAsf'

Increase default base case 50% and reduce recovery base case by 50%: 'A+sf'

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information as part of its ongoing monitoring.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

In addition, Fitch conducted a review of a small targeted sample of BNPP PF's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

- Transaction reporting provided by France Titrisation as at 30 April 2016

- Historical performance data (delinquencies, cumulative defaults per quarterly origination vintage, cumulative recoveries by quarterly default vintage, monthly prepayment data) split by product type from at least 2005 to end-2015, provided by Credipar