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Scope completed the monitoring review for FCT Bpifrance SME 2020-1 on 6 October 2022.

Class A (ISIN FR0014000GV7), EUR 1,551.70m: AAA_SF

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-POSITIVE (+)

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 Since closing, Bpifrance has systematically repurchased defaulted or rescinded loans.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.

CREDIT-NEGATIVE (-)

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

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