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Rating Action:

Moody's assigns definitive ratings to Dutch consumer ABS issued by Chagoi 2010 B.V.

27 Aug 2010

Approx EUR 1,455 Million of debt securities rated

London, 27 August 2010 -- Moody's Investors Service has assigned the following definitive ratings to notes issued by Chagoi 2010 B.V.

- Aaa (sf) to the EUR 1,455.85 million Senior Class A Asset-Backed Notes due 2072

Moody's has not assigned ratings to the subordinated EUR 970.60 million Class B and the EUR 52.15 million Class C Asset-Backed Notes.

RATINGS RATIONALE

The transaction is a cash securitisation of revolving consumer loans extended to obligors in Netherlands by various sellers which are wholly owned subsidiaries of Credit Agricole Consumer Finance Nederland B.V. (CA-CFN). CA-CFN is a wholly owned subsidiary of Credit Agricole Consumer Finance S.A. (CA-CF), which is in turn a wholly owned by Credit Agricole S.A. (Aa1/P-1/Negative). This the first securitisation transaction sponsored by CA-CFN. The sellers also act as the servicers of the portfolio. However, the entire servicing operations are centralised at CA-CFN and the sellers do not possess any servicing capabilities. As such, the servicers have appointed CA-CFN as the sub-servicer of the portfolio.

The portfolio of underlying assets consists of general purpose standard and interest-only revolving loans. These loans relate mainly to financing the acquisition of consumer goods and provide the obligors with repayment and redraw flexibility. For the standard loans, a customer has to repay, on a monthly basis, a minimum payment which is equal to a percentage (typically 1%-2%) of the credit limit. For the interest-only loans, there is an interest only period followed by repayment on terms similar to the standard loans mentioned before. As of June 2010, the portfolio consists of 123,848 borrowers. The loans were originated between 2000 and 2010, with a weighted average seasoning of 2.58 years and interest-only loans comprising approx 53% of the portfolio.

According to Moody's the transaction benefits from credit strengths such as a granular portfolio, relatively simple waterfall and a 1.5% reserve fund which is fully funded at closing and is available to cover any liquidity shortfalls throughout the life of the transaction and credit enhancement at the end. Moody's however notes that the transaction features a number of credit weaknesses such as lack of historical data spanning a complete loan life cycle, nature of the contracts which makes it difficult to assess the amortisation profile of the loans, commingling risk, sizing of the upfront reserve fund, risk of split receivables etc.

As the historical data does not cover the entire loan life cycle, to arrive at the default rate assumption for the pool, Moody's has extrapolated the existing default cohorts to the end of the cohort life. To mitigate the uncertainty related to the amortisation profile of the loans, Moody's tested various redemption and default timing in assessing the rating of the notes. Commingling risk is mitigated by the funding of a commingling reserve upon breach of certain triggers. The risk that the size of the reserve fund at closing is not sufficient to adequately cover for liquidity shortfalls if Euribor increases beyond a certain threshold is mitigated by an increase in the size of the reserve fund by trapping excess spread and funding an additional 2.3% upon the occurrence of trigger events.

Moody's analysis focused, among other factors, on (i) an evaluation of the underlying portfolio of loans; (ii) historical performance information; (iii) the credit enhancement provided by the excess spread and the reserve fund; (v) the liquidity support available in the transaction, by way of principal to pay interest and the reserve fund; (vi) the provisions for the appointment of a back-up servicer and replacement of the Issuer administrator; (viii) guarantee provided by CA-CF guaranteeing various payment obligations (i.e. related to commingling risk, additional reserve funding, repurchase obligations of the sellers) (viii) legal due diligence of the standard form of the contracts and (ix) the legal and structural integrity of the transaction.

Moody's assumed a mean default rate of 11% for the entire pool taking into account the characteristics of each individual sub-pools and their proportion in the total securitised pool. A coefficient of variation of 44% and a recovery rate of 22% are used as the other main inputs for Moody's cash flow model ABSROM.

The V-score analysis for the transaction is Medium. The quality of the historical data for the originator and the originator's historical performance variability are at a medium/high as the historical data does not cover a full loan life cycle and it would be difficult to predict behaviour during good and bad economic times. The transaction complexity is considered medium when compared to low/medium of the sector as the portfolio is made up of several products. The loans are revolving loans with long theoretical maturity and introduce an element of complexity when compared to standard amortising consumer loans. V-Scores are a relative assessment of the quality of available credit information and of the degree of dependence on various assumptions used in determining the rating. For more information, the V-Score has been assigned accordingly to the report "V Scores and Parameter Sensitivities in the Global Consumer Loan ABS Sectors", published in May 2009.

The principal methodology used in rating Chagoi 2010 B.V. was "The Lognormal Method Applied to ABS Analysis", rating methodology published in July 2000. Other methodologies and factors that may have been considered in the process of rating this Issuer can also be found on Moody's website. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating.

The ratings address the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal with respect of the notes by the legal final maturity. 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.

Moody's used its excel based cash-flow model Moody's ABSROM™ as part of its quantitative analysis of the transaction. Moody's ABSROM™ model enables users to model various features of a standard European ABS transaction -- including the specifics of the default distribution of the assets, their portfolio amortisation profile, yield, or recoveries and replenishments during the revolving period, as well as the specific priority of payments, triggers, swaps and reserve funds on the liability side of the ABS structure. Moody's ABSROM™ User Guide, available on Moody's website, covers the functionality of the model and provides a comprehensive index of the user inputs and outputs.

In rating consumer loan ABS, default rate and co-efficient of variation are two key inputs that determine the lognormal distribution. Parameter sensitivities for this transaction have been tested in the following manner: Moody's tested nine scenarios derived from the combination of mean default: 11% (base case), 13.5% (base case +2.5%), 16% (base case +5%) and co-efficient of variation: 45% (base case), 50% (base case +5%), 55% (base case+10%). The results for Class A under these scenarios vary from Aaa (base case) to Aa3 (3 notches in the worst case where the default rate is 16% and the co-efficient of variation is 55%). Parameter Sensitivities provide a quantitative/model-indicated calculation of the number of notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather, how the initial rating of the security might have differed if the two parameters within a given sector that have the greatest rating impact were varied.

REGULATORY DISCLOSURES

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings and public information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating. However, the credit rating action was based on limited historical data.

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Moody's Investors Service adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from reliable sources; however, Moody's Investors Service does not and cannot in every instance independently verify, audit or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Milan
Alex Cataldo
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

London
Durga Bhavani
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
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Moody's assigns definitive ratings to Dutch consumer ABS issued by Chagoi 2010 B.V.
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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