London, 03 July 2013 -- Moody's Investors Service has today assigned a definitive Aaa long-term
rating to the following covered bonds issued by AXA Bank Europe SCF (the
issuer), under French SCF Law
Series 8 -- EUR 750,000,000 floating rate Covered
Bonds due 25 July 2023: Aaa; new rating.
RATINGS RATIONALE
As with all covered bonds AXA Bank Europe SCF's covered bonds benefit
from (1) a promise from the issuer to pay interest and principal on the
covered bonds; and (2) if AXA Bank Europe SCF defaults the economic
benefit from the cover pool.
The covered bond rating takes into account the following factors:
(1) The credit strength of AXA Bank Europe (A2 deposits; D+/baa3
/, Prime-1, negative outlook) the sponsor bank.
(2) The credit quality of the cover pool. The covered bonds will
be primarily backed by Residential Mortgage Backed Securities notes (the
RMBS notes), rated Aaa by Moody's as of the date of this publication.
The RMBS notes are in turn backed by a portfolio of Belgian mortgage loans
originated by AXA Bank Europe.
Other key factors:
(3) The French legal framework of covered bonds, as the covered
bonds are governed by the French SCF covered bonds law.
(4) The exposure to interest-rate risk and the hedging arrangements
in place designed to mitigate this risk.
(5) The issuer maintaining, on a "committed" basis,
minimum over-collateralisation of 5%.
Moody's has assigned a timely payment indicator (TPI) of "Probable" to
this transaction. The TPI does not constrain the rating of the
covered bonds at its current level; however, the covered bond
rating would be expected to be lowered should the issuer's senior
unsecured rating be downgraded.
As is the case with other covered bonds, Moody's considers the transaction
to be linked to AXA Bank Europe's credit strength, particularly
from a timeliness of payment perspective. If this credit strength
deteriorates -- all other variables being equal --
the covered bond ratings may come under pressure.
The rating assigned by Moody's addresses the expected loss posed to investors.
Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors. The Aaa rating assigned
to the covered bonds is expected to be assigned to all subsequent covered
bonds issued under this programme and any future rating actions are expected
to affect all such covered bonds. If there are any exceptions to
this, Moody's will in each case publish details in a separate press
release.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered Bond
Model (COBOL), which determines expected loss as (1) a function
of the issuer's probability of default (measured by the issuer's rating);
and (2) the stressed losses on the cover pool assets following issuer
default.
The cover pool losses for this programme are 14.9%.
This is an estimate of the losses Moody's currently models if AXA Bank
Europe SCF defaults. Cover pool losses can be split between market
risk of 14.9% and collateral risk of 0.0%.
Market risk measures losses as a result of refinancing risk and risks
related to interest-rate and currency mismatches (these losses
may also include certain legal risks). Collateral risk measures
losses resulting directly from the credit quality of the assets in the
cover pool. Collateral risk is derived from the collateral score,
which for this programme is currently 0.0%, reflecting
the current Aaa rating of the RMBS notes.
AXA Bank Europe provides 5% of nominal over-collateralisation
in the cover pool on a "committed" basis. The minimum OC level
that is consistent with the Aaa rating target is 14.5% on
a nominal basis. Therefore, Moody's is relying on "uncommitted"
OC in its expected loss analysis.
All numbers in this section are based on Moody's most recent modelling
(based on data, as of March 2013)
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI),
which indicates the likelihood that timely payment will be made to covered
bondholders following issuer default. The effect of the TPI framework
is to limit the covered bond rating to a certain number of notches above
the issuer's rating.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the issuer's
credit strength. The TPI Leeway measures the number of notches
by which the issuer's rating may be downgraded before the covered bonds
are downgraded under the TPI framework.
Based on the current TPI of Probable, the TPI Leeway for AXA Bank
Europe SCF's covered bonds is one notch. This implies that
Moody's would expect to downgrade the covered bonds because of a TPI cap
if the rating agency downgrades AXA Bank Europe's senior unsecured
rating below A3, all other variables being equal.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and the
TPI; (2) a multiple-notch downgrade of the issuer; or
(3) a material reduction of the value of the cover pool.
RATING METHODOLOGY
The principal methodology used in this rating was "Moody's Approach to
Rating Covered Bonds" published in July 2012. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Hadrien Rogier
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Juan Pablo Soriano
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns definitive Aaa rating to Series 8 issued by AXA Bank Europe SCF covered bonds
