Scope Ratings has reviewed the changes made to FCT Bpifrance SME 2019-1, and no rating action is warranted. (Current rating on the Class A is available here). Following the spread of the Covid-19 pandemic and the resulting economic difficulties for French businesses, Bpifrance Financement has set up a new payment suspension program, further to the support already provided between March and October 2020, this time exclusively destinated to certain industries related to the tourism sector. As a result, any repayments on securitised loans related to such industries are suspended for 6 to 12 months, from October 2020 on.

In this context, the transaction documents have been amended to include a temporary increase of the reserve fund by EUR 5.2m to compensate for missed instalments from loans under payment suspensions. The outstanding balance of SME loans eligible for the payment suspensions is EUR 251.4m, namely 12.6% of the total portfolio. The extra EUR 5.2 will be reimbursed to Bpifrance Financement using available funds starting from January 2022, when the reserve deposit requirement will return to its initial amount, namely EUR 4m. These amendments will first be reflected in the January 2021 payment date, and the temporary reserve increase mechanism will also be applied to potential future Covid-19 payment suspensions.

FCT Bpifrance SME 2019-1 is a true-sale securitisation of a EUR 2.0bn revolving portfolio of loans granted to small and medium-sized enterprises (SMEs) in France by Bpifrance Financement. The entity acts as seller and servicer in the context of this transaction. BNP Paribas Securities Services is the issuer account bank as well as the paying agent. The transaction features a three-year replenishment period, subject to performance and asset-eligibility covenants.

The structure comprises two classes of notes (A and B), which finance the EUR 2.0bn securitised portfolio, along with residual units amounting to EUR 0.1m. Bpifrance Financement, the originator, has funded the original EUR 4m reserve fund, equal to 0.2% of the class A notes. The fixed-rate notes will follow a fully sequential amortisation. Both classes of notes benefit from the interconnected principal and interest priority of payments. The reserve fund provides liquidity and credit enhancement for classes A and B. Credit enhancement for the rated notes is provided via subordination and the reserve fund, as well as excess spread. Both classes pay quarterly and have legal maturity on 25 October 2052.

Scope will continue to monitor FCT Bpifrance SME 2019-1 on an ongoing basis. Ratings and research are freely available at www.scoperatings.com.