TEXT-S&P cuts ratings on French ABS deal FCC Surf’s class A notes

OVERVIEW— On Oct 6, 2011, we lowered our long-and short-term ratings on Dexia Credit Local to ‘A-/A-2’.— Our ratings on FCC Surf’s class A notes are linked to our rating on Dexia Credit Local as the interest rate swap provider.— In accordance with our 2010 counterparty criteria, we have therefore lowered our ratings on these notes to ‘A (sf)’.— Additionally, we have affirmed our ‘BBB+ (sf)’ ratings on the class B notes, which are weak-linked to our unchanged rating on Sanef as the only obligor on the underlying asset in the transaction.— FCC Surf is a French ABS transaction that securitizes receivables arising from a bank loan to Sanef.Standard & Poor’s Ratings Services today lowered to ‘A (sf)’ from ‘A+ (sf)’ its credit ratings on FCC Surf’s class A1 and A2 notes. At the same time, we affirmed our ‘BBB+ (sf)’ ratings on the class B1 and B2 notes (see list below).Today’s rating actions follow the lowering of our long- and short-term counterparty credit ratings on the core entities of Belgium-based banking group Dexia S.A. , including Dexia Credit Local—the interest rate swap provider—to ‘A-/Watch Dev/A-2’ from ‘A/Negative/A-1’. The downgrades reflect our view that tensions on the interbank market have constrained Dexia’s access to wholesale funding markets and increased cash collateral on its hedges (see “Dexia’s Core Banks Downgraded To ‘A-/A-2’ On Funding Constraints; Put On Watch Developing On Possible,” published Oct. 6, 2011).Based on the transaction documents, we have linked our ratings on FCC Surf’s class A1 and A2 to our rating on the interest rate swap provider; we consider the swap agreement to be consistent with our 2007 counterparty criteria, but not our 2010 criteria. Our ratings are therefore constrained to the long-term rating on the counterparty, plus one notch (see “Counterparty and Supporting Obligations Methodology and Assumptions,” published Dec. 6, 2010). Accordingly, we have lowered our ratings on the class A1 and A2 notes to ‘A (sf)’.We have affirmed our ‘BBB+ (sf)’ ratings on the class B1 and B2 notes because they are currently weak-linked to our rating on Sanef—the only obligor of the underlying asset in the transaction—which remains at ‘BBB+/Stable/A-2’.FCC Surf is a French asset-backed securities (ABS) transaction that securitizes receivables arising from a bank loan to Sanef.