Fitch Affirms Domos 2011 Compartment A and B Senior Notes at 'AAAsf'
A full list of rating actions is at the end of this rating action commentary.
The transactions originally closed in October 2011. They are securitisations of French residential loans originated by the specialised lender BNP Paribas Personal Finance (BNPP PF), a 100% subsidiary of BNP Paribas (A+/Stable/F1).
KEY RATING DRIVERS
Domos 2011-B
Document Amendments
Domos 2011-B's transaction structure has been modified as of 27 July 2015. The changes include: (i) an update of the capital structure as a result of the tap issuance whereby the class A notes and the class B notes represent 81.9% and 18.1% of the outstanding portfolio balance, respectively, as of the tap issuance date; and (ii) the revision of the general reserve sizing (4.5% of the balance of the notes as of the tap issuance date during the normal amortisation period and 1% of the outstanding notes balance during the accelerated amortisation period). A portion of the general reserve (1% of the class A and B notes outstanding balance) is dedicated to senior expenses, swap payments and class A interest payments. This portion will be released through the priority of payments once the class A notes have been fully redeemed.
New Portfolio Composition
The provisional portfolio, as of June 2015, comprises 15,823 loans totalling EUR1,642,498,948, with an average current balance of EUR103,805. The portfolio has a weighted average (WA) original loan to value (LTV) of 96.5%, a WA current LTV of 79.1%, a WA debt-to-income (DTI) of 34.6%, a WA seasoning of 67 months and a WA remaining term of 183 months. Fitch applied an adjustment factor of 0.8x to the foreclosure frequency expectation of guaranteed loans in the pool. This reflects the better historical performance of these loans compared with the agency's base foreclosure frequency assumptions.
Default and Recovery Assumptions
Fitch analysed obligor credit risk by updating base case default and recovery assumptions and then stressing these assumptions according to the rating level of the class A notes. Based on up-to-date historical default and recovery data available for origination and default vintages and taking into account the French economic outlook, the agency arrived at a rating default rate of 34.2% and a rating recovery rate of 37.3% at 'AAAsf'.
Credit Support Commensurate with 'AAAsf' Stresses
Fitch's analysis showed that the credit support available following the amendments to the structure documentation remains commensurate with a 'AAAsf' rating for the class A notes. In particular, Fitch tested the resilience of the structure to a negative interest rate, which penalises the structure due to the absence of floors on the swaps (interest and basis swap and cash swap) while the interest rate on the notes is floored at 0%. Credit enhancement for the class A notes (22.6%) is provided by the subordination of the class B notes and the general reserve.
Domos 2011-A
Reduction of General Reserve
As of 27 July 2015, EUR30m from the general reserve was partially released to the seller for and EUR30m of additional and fungible class B notes were issued. As for compartment B, a portion of the general reserve (1% of the class A and B notes outstanding balance) is dedicated to senior expenses, swap payments and class A interest payment while the remaining portion can be used to cover defaults. The general reserve now represents 8.5% of the notes balance at the tap issuance date.
Default and Recovery Assumptions
Fitch analysed obligor credit risk by updating base case default and recovery assumptions and then stressing these assumptions according to the rating of the class A1 and A2 notes. Based on up-to-date historical default and recovery data available for origination and default vintages and taking into account the French economic outlook, the agency derived a rating default rate of 37.0% at AAAsf and a rating recovery rate of 37.9% at AAAsf.
Credit Support Commensurate with 'AAAsf' Stresses
Fitch's analysis showed that credit support available following the amendments to the structure documentation remains commensurate with a 'AAAsf' rating for the class A1 and A2 notes. Credit enhancement for the class A1 and A2 notes (44.6%) is provided by the subordination of the class B notes and the general reserve.
RATING SENSITIVITIES
Domos 2011-A
Expected impact upon the note rating of increased defaults and decreased recoveries (class A):
Original rating: 'AAAsf'
Increase default base case by 10%; reduce recovery base case by 10%: 'AAAsf'
Increase default base case by 25% and reduce recovery base case by 25%: 'AAAsf'
Increase default base case 50% and reduce recovery base case by 50%: 'AA+sf'
Domos 2011-B
Expected impact upon the note rating of increased defaults and decreased recoveries (class A):
Original rating: 'AAAsf'
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%: 'A+sf'
Increase default base case 50% and reduce recovery base case by 50%: 'BBB+sf'
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
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.
Fitch conducted a review of a small targeted sample of BNPP PF's origination files and found some inconsistencies related to the property value information which can include agency or notary fees. These findings were considered in this analysis by assuming 9% haircut to the property value.
Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool 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.
- Loan-by-loan data provided by BNP Paribas Personal Finance as at 30 June 2015
- Yearly origination volumes, monthly dynamic prepayment data and data on cumulative defaults from 2002 to 2015, provided by BNPP PF as at 31 March 2015.
MODELS
The models below were used in the analysis. Click on the link for a description of the model.
- ResiEMEA
- EMEA Cash Flow Model
REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Domos 2011 Compartment Domos 2011-A - Appendix and Domos 2011 Compartment Domos 2011-B - Appendix, dated 17 October 2011 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 26 March 2015 available on the Fitch website.
The rating actions are as follows:
Domos 2011 Compartment Domos 2011-A
Existing notes:
EUR347.6m Class A1 affirmed at 'AAAsf'; Outlook Stable
EUR95m Class A2 affirmed at 'AAAsf'; Outlook Stable
EUR219.7m Class B: not rated
Tap issuance:
EUR30.0m Class B: not rated
The tap issuance notes have been consolidated with the prior issued notes of the same class resulting in the class B notes totalling EUR249.7m.
Domos 2011 Compartment Domos 2011-B
Existing notes:
EUR517.7m Class A affirmed at 'AAAsf'; Outlook Stable
EUR200.2m Class B: not rated
Tap issuance:
EUR890.0m Class A: 'AAAsf'; Outlook Stable
EUR110.0m Class B: not rated
The tap issuance notes have been consolidated with the prior issued notes of the same class resulting in the class A notes totalling EUR1,407.7m and class B notes totalling EUR310.2m.
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