OREANDA-NEWS. Fitch Ratings has affirmed FCT Evergreen HL1's EUR10bn notes at 'AAA' with a Stable Outlook.

KEY RATING DRIVERS
The 'AAA' rating is based on Credit Agricole SA's (CA SA) Long-Term Issuer Default Rating (IDR) of 'A' with Positive Outlook, which acts as the reference IDR for this programme, an unchanged IDR uplift of 1 notch, an unchanged Discontinuity Cap (D-Cap) of 8 notches (minimal discontinuity risk) and on the programme's contractual maximum asset percentage (AP) of 87.7%. The Stable Outlook on the notes is based on the Positive Outlook on CA SA's IDR as well as the Stable Outlook on the French sovereign's IDR and for French residential asset performance.

Fitch's 'AAA' breakeven AP has decreased to 90.5% from 93.5% based on a refined cash flow modelling of pass-through amortisation. The 90.5% breakeven AP is equivalent to a 10.5% breakeven overcollateralisation (OC). It considers a two-notch recovery uplift above a 'AA' tested rating on a probability of default basis.

The main driver of the 'AAA' breakeven OC is the credit loss component of 11.8%. The small cash flow valuation of 0.9% is explained by limited asset and liability mismatches due to the pass-through amortisation of the notes. It is driven by the presence of a residual unhedged share of assets after swap (13%), which negatively impact excess spread in a high interest rate scenario. Finally, an asset disposal loss of 2.2% captures the level of the pass-through constraint not allocated to other OC components. This constraint sets breakeven OC at a level such that principal and interest revenues on assets are sufficient to cover interest payments on the notes under the different stresses applied and given the pass-through amortisation of the notes.

The unchanged D-Cap of 8 notches remains driven by the pass-through amortisation of the notes that would be triggered by an event of default of CA SA and by the presence of sufficient protection against interest rate interruption risk for the programme, leading to a minimal discontinuity risk assessment.

The unchanged IDR uplift of 1 notch reflects the exemption from bail-in of bank's secured liabilities, which form the assets of this double recourse FCT, and Fitch's view that, should CA be resolved, it would likely be by means other than liquidation.

RATING SENSITIVITIES
The rating of the notes issued by FCT Evergreen HL1 would be vulnerable to a downgrade if any of the following occurs: (i) CA SA's IDR is downgraded to 'BB-' or below or (ii) the sum of the IDR uplift and the D-Cap falls to two notches or below.