OREANDA-NEWS. Fitch Ratings has affirmed CIF Euromortgage's EUR12.1bn Obligations Foncieres (OF) at 'AA' with a Stable Outlook.

KEY RATING DRIVERS
The 'AA' rating of the OF is based on Credit Immobilier de France Developpement's (CIFD) Long-term Issuer Default Rating (IDR) of 'A', which acts as the reference IDR for this programme, an unchanged IDR uplift of '1' notch, an unchanged Discontinuity Cap (D-Cap) of 2 notches (high discontinuity risk) and the legal minimum overcollateralisation (OC) level of 5% on which Fitch's 'AA' breakeven OC remains aligned. The Stable Outlook on the OF reflects that on CIFD's IDR and for French residential assets performance.

The 'AA' rating of the OF is based on CIFD's IDR adjusted by the IDR uplift of 'A+' and a two-notch recovery uplift. The 5% 'AA' breakeven OC is driven by a relatively low cash flow valuation of 3.0%, explained by the fully hedged structure of the programme, except for the loans securing the promissory notes (9.4% of modelled assets when adopting a look-through approach). In a scenario combining high interest rates and low prepayments, the longer weighted average life of assets compared with liabilities negatively impacts the present value of assets bearing a fixed rate, while the net present value of floating liabilities is unaffected.

Credit loss is relatively limited at 1.1%, as it only relates to the loans securing the promissory notes. No loss is modelled for the 'AAAsf' rated senior notes of CIF Assets 2001-1 (the rating of the OF is credit-linked to the rating of CIF Assets' senior notes), and on the French sovereign exposure up to the Long-term sovereign IDR of 'AA'. In the absence of mechanisms allowing diversification of cash investments, Fitch considers the exposure to the French sovereign to be a long-term exposure.

The unchanged IDR uplift of '1' notch reflects Fitch's view that France is a covered bond intensive jurisdiction.

The unchanged D-Cap of '2' notches remains driven by the 'high' assessment of the liquidity gap and systemic risk component. Fitch estimates principal coverage of maturities by available cash and short-term investments at six months compared with its expected liquidation timing for residential loans in France of up to 12 months.

RATING SENSITIVITIES
The 'AA' rating of the OF would be vulnerable to a downgrade if any of the following occurs: (i) CIFD's IDR is downgraded to 'BBB' or below; (ii) the sum of the IDR uplift and the D-Cap falls to zero; (iii) CIF Assets 2001-1' senior notes are downgraded below 'AAsf' or (iv) the French sovereign Long-Term IDR is downgraded below 'AA'.