Paris, April 21, 2011 -- Moody's Investors Service has assigned a provisional long term rating
of (P)Aaa to Class [•] €[•] covered bonds (the
" Covered Bonds") to be issued by BPCE SFH ("the Issuer").
RATINGS RATIONALE
As with all covered bonds, the Covered Bonds benefit from two layers
of protection by having recourse to both the Issuer and a collateral pool.
The rating therefore takes into account the following factors:
1) The credit strength of the sponsor bank, currently rated Aa3.
2) The value of the cover pool. The Covered Bonds are backed by
French residential loans.
Other key factors:
3) The commitment of the Issuer to maintain an asset percentage,
provisionally 92.5%, which translates into an over-collateralisation
of around 8.1% based on the current pool. Moody's
considers this over-collateralisation to be "committed".
This committed over-collateralisation comes in addition to the
statutory over-collateralisation calculated on the basis of the
adjusted value of the cover pool, as per SFH law.
4) The use of structuring techniques designed to mitigate the rating linkage
between the Issuer and the Covered Bonds.
Moody's has assigned a Timely Payment Indicator (TPI) of "Probable" to
the Covered Bonds.
As of the launch date, the total value of the assets expected to
be included in the cover pool, comprising 100% Home loans,
is approximately €5 bn. As of the date of this report,
the cover pool comprised of residential loans granted to borrowers located
in France and fully secured either by a guarantee or a mortgage with a
current collateral score of 7.7%. The loans have
a weighted average seasoning of 51 months and a weighted average remaining
term of 186 months. The weighted average loan-to-value
(LTV) ratio is 69.9%
The provisional 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.
Moody's issues provisional ratings in advance of the final sale of securities
and these ratings only represent Moody's preliminary opinion. Upon
a conclusive review of the transaction and associated documentation Moody's
will endeavour to assign a definitive rating to the Covered Bonds.
Assuming assignment of a definitive Aaa rating upon initial issuance of
Covered Bonds, all subsequent Covered Bonds issued by the Issuer
under this programme would be expected to be assigned a Aaa rating.
Consequently, any subsequent future rating actions in relation to
the Issuer's Covered Bonds are expected to affect all such Covered Bonds.
Should there be any exceptions to this, Moody's will in each case
publish details in a separate press release.
A copy of Moody's Pre Sale Report for this transaction is available on
our website www.moodys.com. Alternatively please
call Moody's Client Service Desk on +44 (0)20 7772 5454.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
expected loss analysis and 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 a function of the sponsor
bank's probability of default, measured by its rating of Aa3,
and the stressed losses on the cover pool assets following sponsor bank
default.
The Cover Pool Losses for this programme are 12.9%.
This is an estimate of the losses Moody's currently models in the event
of sponsor bank default. Cover Pool Losses can be split between
Market Risk of 6.8% and Collateral Risk of 6.1%.
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 provisionally 7.7%.
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 credit
strength of the sponsor bank.
The number of notches by which the sponsor bank's rating may be downgraded
before the covered bonds are downgraded under the TPI framework is measured
by the TPI Leeway. Based on the current TPI of Probable the TPI
Leeway for this programme is 3 notches, meaning the sponsor bank
rating would need to be downgraded to Baa1 before the Covered Bonds are
downgraded, all other things being equal.
A multiple notch downgrade of the covered bonds might occur in certain
limited circumstances. Some examples might be (a) a sovereign downgrade
negatively affecting both the sponsor bank's senior unsecured rating and
the TPI; (b) a multiple notch downgrade of the sponsor bank;
or (c) a material reduction of the value of the cover pool.
For further details on Cover Pool Losses, Collateral Risk,
Market Risk, Collateral Score and TPI Leeway across all covered
bond programmes rated by Moody's please refer to "Moody's EMEA Covered
Bonds Monitoring Overview", published quarterly. These figures
are based on the most recent Performance Overview published by Moodys
and are subject to change over time.
RATING METHODOLOGY
The principal methodology used in rating the issuer's covered bonds is
Moody's Rating Approach to Covered Bonds published in March 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information and confidential
and proprietary Moody's Investors Service 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.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify 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.
Paris
Alexis Michon
Asst Vice President - Analyst
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Madrid
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns provisional rating to covered bonds issued by BPCE SFH
