Scope completed a monitoring review of the following notes issued by FCT Bpifrance SME 2019-1:

Class A (ISIN FR0013452117), current balance EUR 1,550.9m: AAA_SF

Class B (ISIN FR0013454212), EUR 450.3m: not rated

FCT Bpifrance SME 2019-1 is a true-sale securitization of a EUR 2.0bn revolving portfolio of loans granted by Bpifrance Financement (Bpifrance) to SMEs in France. Bpifrance also acts as seller and servicer. The transaction closed on October 25, 2019.

The review took place on 19 October 2020 using transaction data through August 2020, resulting in no action on the assigned rating. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found at www.scoperatings.com.

Key rating factors

The Class A notes continue to benefit from robust credit enhancement (22.9%), provided by subordination and the liquidity reserve. Amortization of the notes is not expected to begin until the conclusion of the three-year revolving period (November 2022).

Portfolio turnover has been limited since closing due to the Covid-19 pandemic, as approximately 75% of the pool has benefited from payment holidays lasting between March and September, thus limiting available principal collections used to purchase new assets.

Outstanding delinquencies are 0.24% and cumulative defaults are 0.18% - each below their respective trigger levels of 3.5% and 4.5% during the revolving period. Bpifrance has fully repurchased all defaulted positions.

CREDIT-POSITIVE (+)

Credit enhancement. Class A benefits from 22.9% credit enhancement resulting from subordination as well as a EUR 7.5m cash reserve. The reserve was slightly increased in April 2020 to increase liquidity, as Bpifrance offered short-term payment holidays to eligible borrowers given the macro-economic uncertainties due to Covid-19.

Loan repurchases. Over the first 10 months of the transaction, BPI has systematically exerted its option to repurchase defaulted or rescinded loans.

CREDIT NEGATIVE (-)

Macro-economic context. The French republic faces a recession in 2020 that's been fueled by the Covid-19 pandemic. Despite numerous forbearance measures, defaults and delinquencies may spike once payment suspensions related to the Covid-19 pandemic run out.

Revolving portfolio. Approximately two years of replenishment remain, which leaves noteholders exposed to negative portfolio migration. This risk is largely mitigated by Bpifrance's expertise and the adequate single-asset, portfolio and performance covenants in the structure.

The methodologies applicable for the reviewed ratings (SME ABS Rating Methodology, published 26 May 2020; Methodology for Counterparty Risk in Structured Finance, published 8 July 2020) are available on https://www.scoperatings.com/#!methodology/list .
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Cyrus Mohadjer

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