OREANDA-NEWS. March 30, 2015. Fitch Ratings has affirmed Vauban Mobilisations Garanties' (VMG) EUR750M outstanding bonds at 'AAA' with a Stable Outlook.

This rating action follows a review of the programme and takes into account the issuer's proposed modifications to mitigate its increasing exposure to Groupe BPCE (GBPCE; 'A'/'Stable'). As announced on VMG's website, the non-collateralised exposures of VMG to Groupe BPCE will be replaced with certificates of deposits, collateralised by a pool of residential loans originated by Credit Foncier de France (CFF), with a 10% overcollateralisation.

KEY RATING DRIVERS

The 'AAA' rating of VMG's bonds is based on Credit Foncier de France's Long-term Issuer Default Rating (IDR) of 'A'/'F1', an unchanged Discontinuity Cap (D-Cap) of 8 (minimal discontinuity risk) and the credit quality of the cover pool. The cover pool is made up of (i) 'AAAsf'-rated FCC tranches, and (ii) cash exposure to Groupe BPCE.

The programme is in wind-down mode with the last bond due in January 2017. Since the last review of the programme on March 28, 2014 , proceeds from the FCC tranches have accumulated and are placed either in cash with Natixis ('A'/Stable) or certificates of deposits issued by BPCE. The non-collateralised exposures to Groupe BPCE represent 43% of the cover pool (defined as the nominal of the FCC tranches and the issue repayment reserve). Under Fitch's applicable counterparty criteria, this is considered to be an excessive exposure, given that a jump-to-default of BPCE would result in a default on VMG's bonds.

Fitch considers that the planned amendments by the issuer will mitigate VMG's excessive dependency on BPCE. The 10% overcollateralisation of the certificates of deposits is expected to allow VMG to retrieve the full nominal on these exposures should BPCE default in an 'AAA' scenario and the bonds to be fully repaid. Fitch's approach to excessive counterparty dependency is detailed in the agency's applicable counterparty criteria, available at www.fitchratings.com.

The residential loans pledged to VMG will be secured by a first lien-mortgage or by a guarantee from Credit Logement. The weighted average CLTV of this pool of assets will be lower than or equal to 25%. These amendments are expected to be implemented for May 2015.

RATING SENSITIVITIES

The 'AAA' rating would be vulnerable to a downgrade if any of the following occurred: (i) the mitigants to the group exposure are not carried out within the specified timeframe; or (ii) the FCC notes were downgraded; or (iii) the D-Cap was lowered to two or lower; or (iv) the IDR of CFF was downgraded to 'BB' or lower.