Fitch placed CFF obligations foncières’ AAA rating on Watch Negative yesterday (Thursday) because it expects that the AAA breakeven OC will probably increase above the current level as a result of the downgrade of France last Friday (12 July).

The cover pool backing Compagnie de Financement Foncier (CFF) obligations foncières contains French public sector exposure, which represents around 17% of CFF’s balance sheet as of the end of March, according to Fitch.

The rating agency said that the downgrade of France from AAA to AA+ last Friday means that modelled losses for French public sector assets will increase “materially” in a AAA scenario and that the AAA breakeven overcollateralisation (OC) level is likely to increase above the prevailing level of 16%.

The level of nominal OC for CFF was 17.7% as of the end of March, according to Fitch.

“The RWN will be resolved upon Fitch’s recalculation of the breakeven OC for the AAA rating, on the basis of updated cover pool composition and the issuer’s intention regarding the level of OC protecting investors,” it said.