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3 years ago
Fitch Downgrades BNPP PS SCF's Obligations Foncieres to 'AA'; Stable Outlook
December 17, 2014 / 5:27 PM / 3 years ago

Fitch Downgrades BNPP PS SCF's Obligations Foncieres to 'AA'; Stable Outlook

(The following statement was released by the rating agency) PARIS/LONDON, December 17 (Fitch) Fitch Ratings has downgraded BNP Paribas Public Sector SCF's (BNPP PS SCF) Obligations Foncieres (OF; French legislative covered bonds) to 'AA' from 'AA+' and removed them from Rating Watch Negative. The Outlook is Stable. The rating action follows the downgrade of France's Issuer Default Rating (IDR) to 'AA' from 'AA+' (see 'Fitch Downgrades France to 'AA'' Outlook Stable', dated 12 December 2014). The programme is affected by the sovereign rating action given its cover pool's exposure to French sovereign-related entities. KEY RATING DRIVERS Fitch's downgrade of the OF rating to 'AA' is driven by the cover pool's large exposure to French sovereign-related assets, in the form of French sovereign bonds (4%) and Coface - the French sovereign's export credit agency - guarantee/insurance exposures (30%). In Fitch's analysis, the OF rating is credit-linked to the rating of France and the agency assumes that no losses occur on French sovereign bonds and Coface guarantee/insurance exposures in a rating scenario at or below the French sovereign rating. In a rating scenario above the French sovereign rating, Fitch models a default of some French exposures in the pool, with low recoveries. The issuer's committed OC of 5.5% is therefore no longer sufficient to support a 'AA+' rating on the OF following the downgrade of the French sovereign to 'AA'. The OF rating is based on the Long-Term IDR of BNP Paribas (A+/Stable/a+) and the IDR uplift of 2 assigned to the programme. This results in a floor for the OF rating on a probability of default (PD) basis of 'AA', irrespective of the actual OC protection available to the OF. As a result, the 'AA' breakeven OC has been set at the legal minimum for SCF, which is 5%. BNPP PS SCF's Discontinuity-Cap (D-Cap) of 2 (high) remains unchanged. In its analysis, Fitch relies on the minimum legislative 5% OC applicable to the programme. The agency notes that the 5% OC is unlikely to be sufficient for maintaining the 'AA' rating of the OF, should the reference IDR of the programme be downgraded. The downgrade of the French sovereign rating by one notch to 'AA' does not affect the liquidity gaps and systemic risk component of the Fitch's discontinuity analysis for French covered bond programmes. RATING SENSITIVITY The 'AA' rating of the OF would be vulnerable to downgrade if BNPP's IDR is downgraded to 'BBB-' or below. Contact: Primary Analyst Francois-Xavier Deucher, CFA Director +33 1 44 29 92 72 Fitch France S.A.S. 60 rue de Monceau 75008 Paris Secondary Analyst Will Rossiter Director +33 1 44 29 91 47 Committee Chairperson Cosme de Montpellier Senior Director +44 20 3530 1407 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, 'Covered Bonds Rating Criteria', dated 8 August 2014; 'Counterparty Criteria for Structured Finance and Covered Bonds' and 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum', both dated 14 May 2014; 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds', dated 23 January 2014; 'Asset Analysis Criteria for Covered Bonds of European Public Entities', dated 30 January 2013; 'Covered Bonds Rating Criteria - Public Sector Liquidity and Refinancing Stress Addendum', dated 7 February 2014; 'EMEA RMBS Master Rating Criteria' and 'EMEA Residential Mortgage Loss Criteria', both dated 28 May 2014; 'EMEA Criteria Addendum - France', dated 4 June 2014; 'Covered Bonds Rating Criteria - Mortgage Liquidity and Refinancing Stress Addendum', dated 4 February 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds here Asset Analysis Criteria for Covered Bonds of European Public Entities here Covered Bonds Rating Criteria – Public Sector Liquidity and Refinancing Stress Addendum here EMEA RMBS Master Rating Criteria here EMEA Residential Mortgage Loss Criteria here Criteria Addendum: France - Residential Mortgage Loss and Cash Flow Assumptions - Amended here Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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