GE Money Pools €1.56B in French-Loan RMBS

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GE Money Bank is securitizing a second round of French debt consolidation mortgage loans for 2016.

The outstanding principal in the pool is €1.56 billion, and will five classes of notes to be issued through a French trust, SapphireOne Mortgages FCT 2016-2.

The debt consolidation loans originated by GE are backed by French homes, in a deal arranged by Morgan Stanley and the second true-sale securitization of debt consolidation receivables. The deal builds on a smaller initial €871.2 million SapphireOne issuance in July.

The transaction is topped by an Class A notes tranche with a preliminary ‘AAA’ rating from Standard & Poor’s that will be comprise 83.2% of the pool (or about €1.3 billion). S&P also issued ratings for four subordinate classes of notes totaling approximately €162 million, with varying ratings ranging from ‘AA’ to ‘BB’. An estimated €138 million Class F notes tranche will not be rated.

The Class A notes feature 13.35% credit enhancement; the legal maturity on all notes in June 2061.

The pool of 25,620 loans were taken out by 20,811 borrowers, in a mixture of fixed-rate (33.65%), floating rate (5.33%) and variable rate (61.02%).

A majority of the loans are with owner-occupied properties, with borrowers having a weighted debt-to-income level of 30.52%.  

All the loans are amortizing (and tied to the three-month Euribor benchmark), although S&P warned in a presale report that the floating-rate loans’ principal reduction could be impaired by specialty “buyer protection mechanisms” under French loan regulations.

Those requirements involve variable-rate loans in which borrowers have a predefined fixed-installment payment schedule. As rates increase or decrease, the proportion assigned to interest changes. So, in a rising rate environment, more of the funds would flow to interest rather than principal.

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