BPCE Group, France’s second-largest bank, is pooling together €5 billion (U.S.$5.6 billion) worth of personal consumer loans into a securitization portfolio, including a mix of auto, cash, home improvement and debt consolidation loans.

The loans in BPCE Consumer Loans FCT 2016_5, ranging from €200 to €75,000, will be backing 14-year notes to be split between Class A and Class B tranches. Only the €3.33 billion Class A notes are being rated, with Standard & Poor’s weighing in with a preliminary ‘AAA’ structured finance rating. The Class A notes will include 34.1% available credit enhancement, and carry a 0.12% coupon.

The unrated Class B notes totaling €1.67 billion will pay a 1.5% coupon. The structure also includes a small portion of residual notes that will be retained, and will have a two-year revolving period where new loans could be substituted in to ensure deteriorating assets to not exceed a threshold size in the portfolio nor that the weighted average interest rate in the pool doesn’t fall below 3%.  

S&P notes that with expectations of consumers will pay down higher-yielding loans than other borrowings, the agency has included an assumption in its cash flow analysis that 50% of prepayments will come from the loans carrying the higher interest rates.

The outstanding principal of the private consumer loan pool is €5.188 billion, with an average loan size of €12,749 with terms of five years and a weighted average interest rate of 5%. Nearly half (49%) are Trésorerie (Treasury) cash loans, 23.7% are auto loans, 23.1% are home improvement, and the remainder (4.3%) are miscellaneous other loans. Nearly 34% involve debt consolidation, according to an S&P presale report.  More than 50% of the loans were issued in 2015.

S&P has assumed a default rate of 6.95% in its ratings analysis.

An FCT is a special purpose vehicle set up by BPCE under French law whose sole purpose is to purchase and securitize notes from the company.

BPCE is a merged entity of two cooperative banking networks, Banque Populaire and Caisse d’Epargne, and includes subsidiaries such as global asset management firm Natixis.

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