Reuters: Financial Services and Real Estate: TEXT-Fitch asgns Mercurius Funding N.V./S.A. Compartment Mercurius-1 final ratings

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TEXT-Fitch asgns Mercurius Funding N.V./S.A. Compartment Mercurius-1 final ratings May 7th 2012, 13:14 Mon May 7, 2012 9:14am EDT (The following statement was released by the rating agency) May 07 - Fitch Ratings has assigned Mercurius Funding N.V./S.A. Compartment Mercurius-1's notes, the following final rating: EUR3,200,000,000 class A notes: 'A+sf'; Outlook Stable EUR924,000,000 class B notes: Not rated The rating on the class A notes addresses the timely payment of interest and repayment of principal by legal final maturity in April 2035. The transaction is a static cash flow securitisation of a EUR4bn portfolio of loans granted to Belgian small-and medium-sized enterprises (SMEs) and self-employed individuals originated by Dexia Bank Belgium (Belfius, 'A-'/Stable/'F1'). The rating on the class A notes is based on collateral quality, available credit enhancement and transaction structural features. The class A notes benefit from 21.9% credit enhancement provided by the subordination of the unrated class B notes. Both classes of notes have principal deficiency ledgers (PDL) which reserve against expected loss amounts when a loan becomes delinquent for more than 90 days. The funds are applied to reduce the PDL balance at the time the loan is written off. Of the underlying loans in the portfolio, 98% pay interest and principal on a monthly basis. Bullet loans account for only 1.46% of the pool. While 81.5% of the portfolio comprises fixed-rate loans the coupon of which can not be reset until the loans' amortisation, 17.5% of the pool are fixed-rate coupon loans, the coupon of which is resettable following a specific frequency of three, five or ten years. Fitch received the historical interest rates of Belfius' entire SME loan book since 1990, which the agency incorporated in its analysis. Moreover, Fitch stressed the resettable fixed-rate and the floating-rate loans in decreasing, increasing and stable interest rates environments, according to the agency's criteria for interest rate stresses. The class A notes are paying monthly interest on a fixed-rate coupon of 3%. The structure does not include a swap to hedge the remaining basis and reset risk. In Fitch's view, the remaining basis risk is adequately addressed by the available enhancement. Belfius performs most of the transaction's counterparty roles, including those of account bank and portfolio servicer. While no back-up servicer has been appointed for the transaction at closing, servicing continuity risk is mitigated by operational features (notification and servicer termination triggers), as well as structural features (a reserve fund that provides liquidity to the class A notes; principal diverted from the principal waterfall in case of a shortfall in interest available for the class A notes). If the seller is downgraded below 'BBB+'/'F2', it will fund and maintain a deposit sized and available to cover the potential set-off risk for the transaction. The EUR4.2bn portfolio, as of 31 January 2012, that Fitch analysed is granular and consists of 60,546 loans to 37,380 borrower groups of SMEs and self-employed individuals. The top obligor group is 0.37% of the portfolio and the top ten obligor groups 2.5%. A new issue report is available at www.fitchratings.com A comparison of the transaction's representations and warranties to those Fitch considers to be typical for European SME transactions is available in the appendix document entitled "Mercurius Funding N.V./S.A. Compartment Mercurius-1- Representations and Warranties", dated 7 May 2012 and available at www.fitchratings.com. Link to Fitch Ratings' Report: Mercurius Funding N.V./S.A. Compartment Mercurius-1 here Link this Share this Digg this Email Reprints

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