Fitch Affirms Axa Bank Europe SCF's OF at 'AAA'; Outlook Stable
Fitch Ratings-Paris-16 October 2015: Fitch Ratings has affirmed AXA Bank Europe SCF's EUR 3.9bn Obligations Foncieres (OF, French legislative covered bonds) at 'AAA'. The Outlook is Stable.
KEY RATING DRIVERS
The unchanged 5% breakeven overcollateralisation (OC) for the 'AAA' rating of the OF is driven by the asset disposal loss component of 7.6%, which reflects the maturity mismatches between the assets and the liabilities and the haircuts applied to the sale of assets needed to repay maturing OF. The cash flow valuation component of negative 2.6% reflects the limited excess spread generated under the structure and the well matched post-swap interest-rate position of the assets and liabilities, together with the gap between the stressed WA life of the assets (7.5 years) and the liabilities (4 years). The credit loss component of 0.8% is not a key driver of the OC as the cover pool is mainly composed of 'AAA' rated RMBS notes (90% of the cover pool), for which no expected loss is assumed in the OF analysis.
The Stable Outlook on the OF rating reflects the Outlook on the reference IDR (Axa Bank Europe) and Fitch's view on the underlying Belgian and French residential loan assets backing the senior RMBS notes collateral and promissory note collateral, respectively.
The rating reflects AXA Bank Europe's Long-Term Issuer Default Rating (IDR) - which acts as reference IDR for the programme - an unchanged IDR uplift of 1, an unchanged Discontinuity-Cap (D-Cap) of 4 (moderate risk) and the 19.6% nominal OC that Fitch takes into account in its analysis, which provides more protection than the 5% 'AAA' breakeven OC.
The unchanged IDR uplift of 1 reflects the OF's exemption from bail-in and Fitch's view that France is a covered bond-intensive jurisdiction. Fitch has revised its assessment of the Privileged
Derivatives component to 'moderate' from 'low', notably reflecting the material exposure to external hedge counterparties whose replacement language is not in line with the agency's applicable criteria.
RATING SENSITIVITIES
The 'AAA' rating of the OF would be vulnerable to a downgrade if any of the following occurs: (i) the reference IDR was downgraded to 'BBB' or below, (ii) the total number of notches represented by the IDR uplift and the D-Cap is reduced to two or lower.
Fitch's breakeven OC for the OF rating will be affected, among others, by the profile of the cover assets relative to outstanding OF, which can change over time, even in the absence of new issuance. Therefore the breakeven OC to maintain the OF rating cannot be assumed to remain stable over time.
Contact:
Primary Analyst Will Rossiter Director
+33 1 44 29 91 47 Fitch France S.A.S.
60 rue de Monceau 75008 Paris
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20/10/2015
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Secondary Analyst Francois le Roy Associate Director +33 1 44 29 91 75 Committee Chairperson Emmanuelle Ricordeau Senior Director
+33 1 44 29 91 48
Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email:
christian.giesen@fitchratings.com.
Additional information is available on www.fitchratings.com Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014) (https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158)
Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014) (https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175) Covered Bonds Rating Criteria (pub. 23 Jul 2015)
(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868658)
Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum (pub. 23 Sep 2015) (https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871331) Criteria Addendum: Belgium - Residential Mortgage Assumptions (pub. 29 May 2015)
(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866260) Criteria Addendum: France - Residential Mortgage Assumptions (pub. 08 Jun 2015) (https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866798)
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014) (https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868) EMEA RMBS Rating Criteria (pub. 28 Aug 2015)
(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870255) Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
(https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992410) Solicitation Status (https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992410) Endorsement Policy (https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?
context=2&detail=31)
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PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS
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Endorsement Policy - Fitch's approach to ratings endorsement so that ratings produced outside the EU may be used by regulated entities within the EU for regulatory purposes, pursuant to the terms of the EU Regulation with respect to credit rating agencies, can be found on the EU
Regulatory Disclosures (https://www.fitchratings.com/regulatory) page. The endorsement status of all International ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for all structured finance transactions on the Fitch website. These
disclosures are updated on a daily basis.
