Fitch cut CIF Euromortgage obligations foncières from AAA to AA+ yesterday (Monday) because of a downgrade of the French sovereign just over a week ago. It affirmed at AAA OH programmes of BNP Paribas, CM-CIC, Crédit Agricole and Société Générale.

Fitch downgraded France from AAA to AA+ on Friday, 12 July, which led to the AAA breakeven overcollateralisation percentage for CIF Euromortgage obligations foncières being above the OC to which Fitch gives credit in its analysis.

CIF Euromortgage’s cover pool includes 11.2% of substitution assets guaranteed by the French state as of the end of June.

The rating agency considers CIF Euromortgage’s obligations foncières to be in run-off mode given that the group stopped originating new loans in September 2012 after running into trouble and having to be rescued by the French government. Fitch therefore only gives credit to publicly committed OC (8.3%).

“The breakeven OC for the OF’s AA+ rating is slightly lower than the previous AAA breakeven OC and is below the current committed level,” said the rating agency.

It also revised the outlook on CIF Euromortgage’s OFs to stable, in line with that of the French sovereign.

Mortgage covered bonds issued by BNP Paribas, Crédit Agricole, Crédit-Mutuel CIC, and Société Générale, via their Sociétés de Financement de l’Habitat, were affirmed at AAA. Fitch last week downgraded Crédit Agricole and Société Generale but affirmed BNP Paribas and Banque Fédérative du Crédit Mutuel.

The main sponsor banks of the covered bond programmes have to post cash because the institutions’ short term issuer default ratings were cut to F1, triggering a pre-maturity test to overcome liquidity gaps.