Fitch Affirms CM-CIC HL FCT, CMNE HL FCT & Zephyr HL FCT's Notes at 'AAA'
The affirmation follows the annual review of the programme.
KEY RATING DRIVERS
The notes' 'AAA' ratings are based on the Long-Term Issuer Default Rating (IDR) of Banque Federative du Credit Mutuel (BFCM; A+/Stable), the holding company of CM11-CIC, which acts as reference IDR for these programmes, an unchanged IDR uplift of '2', an unchanged Discontinuity-Cap (D-Cap) of eight notches (minimal risk) and the programmes' contractual maximum asset percentages (AP). The Stable Outlooks on the notes reflect that on BFCM's IDR and that for French residential asset performance.
Fitch's 'AAA' breakeven AP has slightly decreased to 84.5% from 85.0% for the notes issued by CM-CIC HL FCT, while it has increased to 82.5% from 80.0% for the notes issued by CMNE HL FCT and is unchanged at 80% for the notes issued by Zephyr HL FCT. This reflects Fitch's updated asset and cash flow analysis for the programmes. The breakeven APs consider a two-notch recovery uplift above a 'AA' tested rating on a probability of default basis defined as BFCM's IDR as adjusted by the IDR uplift. Timely payment is assumed at a 'AA' rating level irrespective of the actual level of OC protection available.
The maximum contractual AP for CM-CIC HL FCT, CMNE HL FCT and Zephyr HL FCT (82.5%, 81.3% and 78.4% respectively) provide more protection than Fitch's 'AAA' breakeven AP for each of the programmes.
The corresponding 'AAA' breakeven overcollateralisation (OC) of each of the programmes (18.3%, 21.2% and 25% respectively) is driven primarily by the credit loss component (16.5%, 21.0% and 22.6% respectively), as the pass-through amortisation profile of the notes reduces asset and liability mismatches. The positive cash flow valuation component (4.7%, 2.3% and 6.1% respectively) nevertheless reflects the negative excess spread between floating rate assets (after swap) and liabilities.
In its asset analysis, Fitch assumed a 15% recovery rate for loans secured by a security type other than a first rank mortgage or a guarantee provided by a credit institution or an insurance company (0% recovery rate in the case of self-employed borrowers). We assumed a 0% recovery rate for loans with no security.
The D-Cap of eight notches for each of the programmes is unchanged and reflects the pass-through amortisation of the notes. Fitch has revised its assessment of the asset segregation component to 'low' from 'moderate', notably reflecting its assessment that claw-back risk and commingling risk are adequately mitigated and that set-off risk is deemed to be remote for FCTs.
The unchanged IDR uplift of '2' reflects the exemption of the covered bonds from bail-in, the fact that Fitch considers resolution by other means than liquidation likely for CM11-CIC and the protection provided by senior unsecured debt in excess of 5% of total adjusted consolidated assets of CM11-CIC.
RATING SENSITIVITIES
The ratings of the notes issued by CM-CIC Home Loans FCT, Zephyr Home Loans FCT and CMNE Home Loans FCT are vulnerable to a downgrade if any of the following occurs: (i) BFCM's IDR is downgraded by nine notches to 'B+' or lower; (ii) the number of notches represented by the IDR uplift and the D-Cap is reduced to one or lower; (iii) the level of AP that Fitch gives credit to in its analysis increases above Fitch's 'AAA' breakeven AP of 84.5% for CM-CIC Home Loans FCT, 82.5% for CMNE Home Loans FCT and 80.0% for Zephyr Home Loans FCT.
The Fitch breakeven AP for the covered bond rating will be affected, among others, by the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore the breakeven AP to maintain the covered bond rating cannot be assumed to remain stable over time.
Комментарии