OREANDA-NEWS. Fitch Ratings has upgraded Dexia Secured Funding Belgium NV, Compartment DSFB-IV's EUR2,212,960,220 class A notes to 'AAsf' from 'AA-sf'. The Outlook is Negative.

The transaction is a securitisation of Belgian public entities' debt governed under Belgian law and originated by Belfius Bank. The senior loans to public entities are located in three Belgian regions: Flanders (50.2%), Wallonia (37.3%) and Brussels (12.5%). This links the notes' rating to Fitch's credit view of the Belgian local authorities and caps the rating of the most senior notes at the Kingdom of Belgium's rating (AA/Negative/F1+).

KEY RATING DRIVERS
The upgrade of the class A notes reflects the increased credit enhancement (CE) following the deleveraging and the stable performance of the portfolio over the past 12 months. The class A notes have been redeemed by EUR404m, which has reduced the note factor of the initial balance to 47.1% from 55.7%. This led to an increase in CE to 14.5% from 12.4% at our last review.

The portfolio became static after the transaction's revolving replacement loan feature expired in October 2014 and the number of loans decreased to 24,922 from 26,802. Despite the significant deleveraging, the borrower concentration only marginally changed. The largest borrower exposure increased to 2.57% from 2.38% and the top 20 borrower exposure decreased to 24.5% from 24.6%. The borrower's region and sector distributions are largely unchanged and the credit quality of the portfolio remained at 'A'/'A-'. The weighted average life of the portfolio decreased to 6.07 from 6.37.

The reserve fund is currently fully funded at EUR60m. The fund may step up to EUR100m following any delinquencies or defaults above 2% of the initial pool balance during the life of the transaction. No delinquencies or defaults have been reported since the closing of the transaction.

RATING SENSITIVITIES
Fitch incorporated additional sensitivity stresses on the notes' rating in its analysis. The stresses addressed a single notch downgrade and a single category downgrade of the credit rating of the underlying portfolio. Both stresses have had no material impact on the notes' ratings.

However, due to the linkage of the transaction with the Kingdom of Belgium, a rating action could be triggered by a rating action on the sovereign.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Overall, Fitch's assessment of the 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 Belfius Bank as at 13 January 2016
- Transaction reporting provided by Belfius Bank as at 13 January 2016