Scope has completed a monitoring review of the class A notes issued by FCT Bpifrance SME 2020-1
Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.
Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.
Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.
Scope completed the monitoring review for FCT Bpifrance SME 2020-1 on 6 October 2022.
Class A (ISIN FR0014000GV7), EUR 1,551.70m: AAASF
Class B (ISIN FR0014000HW3), EUR 450.50m: not rated
Residual units (ISIN QS000212MI63), EUR 0.095m: not rated
This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com
FCT Bpifrance SME 2020-1 is a revolving cash securitisation consisting of loans granted to SMEs in France by Bpifrance.
The Class A notes continue to benefit from robust credit enhancement (22.7%), provided by subordination and the liquidity reserve. Amortisation of the notes is not expected to begin until the conclusion of the revolving period (December 2023).
Outstanding delinquencies are 0.65% and cumulative defaults are 1.36% - each below their respective trigger levels of 4.0% and 4.1% (until February 2023, 7.6% thereafter). Bpifrance has fully repurchased all defaulted positions.
The review was conducted based on available investor reports reflecting performance up to the 31 August 2022 management report.
Key rating factors
Credit enhancement. Class A benefits from 22.7% credit enhancement resulting from subordination as well as a EUR 3.5m cash reserve.
Loan repurchase. Since closing, Bpifrance has systematically repurchased defaulted or rescinded loans.
Guarantee fund and cash collateral. The loans benefit from two sources of credit risk mitigation: i) a minimum of 50% guarantee mechanism funded by state; and ii) a fixed cash collateral representing 5% of the initial loan amount.
No interest rate risk. Floating-rate loans are ineligible for the portfolio while the issued notes pay fixed-interest coupons. This eliminates interest rate risk.
Macro-economic uncertainty. Besides further Covid-19 restrictions and related stress to the economy, the energy crisis and increased inflation will impact the French economy. Scope expects growth to slow to 2.4% in 2022 and 1.2% in 2023, from 6.8% in 2021. Consequently, the senior note remains exposed to back-loaded defaults, a notable downside risk because of the revolving portfolio. The risk is mitigated by the collateral performance triggers and Bpifrance systematic repurchase of the defaulted loans to date.
Revolving portfolio. Approximately one year of replenishment remains, which leaves noteholders exposed to negative portfolio migration. This risk is mitigated by Bpifrance’s expertise, the single-asset, portfolio and performance covenants, and the little portfolio migration to date.
The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 17 December 2021; SME ABS Rating Methodology, 16 May 2022; Counterparty Risk Methodology, 14 July 2022) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Benjamin Bouchet, Director
© 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.