CIF Euromortgage has publicly committed to maintain a minimum overcollateralisation level of 8.3%, according to Fitch, which removed the French issuer’s obligations foncières from Rating Watch Negative today (Friday) and affirmed their AAA rating, on negative outlook. However, it noted that a downgrade of France could lead to a downgrade.

The rating agency also removed from RWN the F1+ rating of Eu45m of short term obligations foncières maturing in July.

Fitch said that the 8.3% level is equal to the AAA breakeven OC calculated by Fitch.

The negative outlook stems from Fitch’s negative outlook on the French sovereign (rated AAA), because it has not modelled any credit risk on the exposures forming part (11.1%) of the cover pool and expected to be guaranteed by the state, said the rating agency. It said that should France be downgraded, its AAA breakeven OC level would increase, which could potentially lead to a downgrade of the obligations foncières based on the absence of an OC buffer.

The rating agency said that the obligations foncieres’ rating remains linked to the AAAsf rating, which is on stable outlook, of Class A unites issued by CIF Assets 2001-1, which represent 77% of CIF Euromortgage’s cover pool and is backed by a pool of residential loans originated by Caisse Centrale du Crédit Immobilier de France (3CIF).

Fitch noted that its analysis relies on public statements regarding the maintenance of OC rather than the lowest level observed over the past 12 months because it considers the programme to be in run-off mode, with the group having stopped originating new loans in September.

“Fitch’s breakeven OC for the OF rating will be affected, among others, by the profile of the cover assets relative to outstanding OF, which can change over time, even in the absence of new issuances,” it said. “Furthermore, it rests on the assumption that the French state guarantee applicable to certain exposures towards 3CIF will be approved by the European Commission.”

A covered bond analyst welcomed CIF Euromortgage’s move, contrasting it with the attitude of some other issuers.

“Given that the group no longer originates new business, the OC commitment is positve and differentiates CIFEUR from other wind-down issuers (e.g. Depfa ACS, HYPFRA, HYPFRA Lux), which care less about ratings,” he said. “Spreads should remain well supported.”