MOODY' S ABCP RATING ACTIONS FOR THE SEVEN-DAY PERIOD ENDED JUNE 6, 2003:
New York, June 09, 2003 -- MOODY'S LONDON REPORTS THAT POST-REVIEW STATUS FOR EUROPEAN ABCP
CONDUITS ATTRACTS GROWING INTEREST
Moody's London says in a new Special Report that increased demand for
efficient transaction execution in the European asset-backed commercial
paper (ABCP) market is fuelling a growing interest on the part of European
ABCP conduits to achieve "post-review" status from Moody's Investors
Service for their transactions.
Moody's believes it is possible for Prime-1-rated European
conduits to achieve post-review status for certain types of transactions,
despite lacking the same characteristics as their US counterparts.
"Moody's will prescribe detailed asset class-specific criteria
for European post-review conduits, designed to ensure that
each asset pool is structured to a Prime-1 standard notwithstanding
the absence of a prior review by the rating agency," says Edward
Manchester, a Moody's Vice President/Senior Analyst and author of
The Special Report, entitled "Achieving Post-Review Status
For Trade Receivables Transactions Financed By European ABCP Conduits,"
details the factors examined by Moody's in determining whether post-review
status is warranted as well as the challenges conduits face in achieving
this status. The report also notes other opportunities for transactions
to be executed on a post-review, or limited-review,
basis. The report may be found on Moody's web site, moodys.com.
MOODY'S RATES SENIOR CLASSES OF BLUE HERON VII CDO PRIME-1
Moody's has assigned ratings to three tranches of notes and one class
of certificates issued by Blue Heron Funding VII Ltd. and co-issuer
Blue Heron Funding VII Inc. (the "Issuers"). Moody's assigned
Prime-1 ratings to the U.S.$738,750,000
Class A-1 Blue Heron Funding VII Notes, Series 2003-1,
due May 28, 2004 (the "Class A-1 Notes"), and the U.S.$400,000,000
Class A-2 Blue Heron Funding VII Notes, Series 2003-1,
due May 28, 2004 (the "Class A-2 Notes").
The short-term rating of the Class A-1 Notes is applicable
only to those Class A-1 Notes issued on the Closing Date and maturing
on May 28, 2004 and the short-term rating of the Class A-2
Notes is applicable only to those Class A-2 Notes issued on the
Closing Date and maturing on May 28, 2004, and does not address
any payments that may be made on any other dates.
Moody's explained that the ratings of the Class A-1 Notes and Class
A-2 Notes (the "Class A Notes) are primarily based on the issuers'
ability to rely on a put option entered into with WestLB AG, ("WestLB"),
acting through its London branch and a cash flow swap entered into with
WestLB, acting through its New York branch. The put option
is designed to fund the principal repayment of any Class A Notes that
are not successfully remarketed at their maturity, and the cash
flow swap is structured to fund any shortfall between the issuers' collections
from their assets and the amount of interest due on the Class A notes.
In addition, the amount WestLB is required to pay under its support
obligations cannot be reduced for defaults on the issuers' underlying
assets. The combined amounts of the put option and cash flow swap
are designed to provide the investor the full amount of principal and
interest due on the Class A Notes. The short-term rating
of the Class A Notes is closely correlated to the short-term deposit
rating of WestLB. WestLB has a short-term deposit rating
of Prime-1, a long-term senior deposit rating of Aa1
and a bank financial strength rating of D. On May 15, 2003,
Moody's placed on review for possible downgrade WestLB AG's bank financial
strength rating (FSR) of D. Any replacement support provider would
be required to carry a Prime-1 rating.
WestLB, through its New York branch, is also contracted as
the manager of the Issuers' assets, which primarily consist of highly
rated investment-grade structured finance securities. WestLB
currently manages 7 other CDO transactions.
MOODY'S ASSIGNS PRIME-1 RATING ABCP ISSUED BY ARTH CAPITAL CORP.
Moody's has assigned a Prime-1 rating to the asset-backed
commercial paper (ABCP) issued by Arth Capital Corp. Arth is an
ABCP conduit financing backed by unalloyed base metals inventory,
sold by Glencore AG and Glencore International AG (Baa2/Prime-2,
on review for possible downgrade) to Base Metals Finance Company Limited
and hedged at least once every three commodity business days. It
is sponsored by Glencore, a leading global natural resources company,
based in Baar, Switzerland, which is already the sponsor of
another conduit, Albis Capital Corp. Albis is also rated
Prime-1 by Moody's. Arth is authorized to issue up to $750
million of ABCP.
This transaction is innovative as an inventory securitization in that
it relies not only on the intrinsic value and liquidity of the financed
assets, which are commodities traded both on and outside an organized
market, the London Metals Exchange, but also on hedging arrangements
to mitigate the fluctuations in the value of the funded assets.
The sophisticated hedging arrangements with the commodity departments
of two Prime-1 banks constitute a major strength for the conduit.
Also, a syndicate of Prime-1 rated banks will provide liquidity.
Moody's views the sizing, role and mechanics of the liquidity agreement
as adequate. Enhancement was sized using conservative assumptions
based on historical data. In relation to the physical inventory
reserve, the limited amount of published premium data is mitigated
by the inclusion of a dynamic adjustment mechanism.
The complex nature of this conduit means that ABCP investors will rely
heavily on the high degree of competence of the servicer. One potential
risk associated with this is reliance on certain key personnel.
However, the adequate staffing, quality of the systems and
well-documented procedures mitigate this risk adequately,
in Moody's view.
Please see Moody's press release dated June 3, 2003 for further
THE RATINGS OF THE FOLLOWING ABCP PROGRAMS WERE CONFIRMED BY MOODY'S AT
PRIME-1 DURING THE PERIOD MAY 30, 2003 THROUGH JUNE 6,
DZ BANK'S AUTOBAHN FUNDING ADDS $75 MILLION FULLY SUPPORTED EQUIPMENT
Autobahn Funding Co. LLC, DZ Bank Deutsche Zentral-Genossenschaftsbank
Frankfurt AM MAIN's (DZ Bank) (A2/Prime-1/D) partially supported,
multiseller ABCP conduit, added a $75 million revolving loan
facility. The seller, which is unrated, originates
and services equipment leases and loans for its clients. The underlying
equipment is primarily business equipment and machinery, such as
dry cleaning, commercial car washing, construction,
furniture and telecommunications equipment. Liquidity, sized
at 102% of the loan facility, or $76.5 million,
is provided by Prime-1-rated DZ Bank and fully supports
this transaction in Autobahn. Autobahn is currently authorized
to issue up to $2.73 billion of ABCP.
WACHOVIA'S BLUE RIDGE ADDS $200 MILLION REVOLVING LOAN FACILITY
BACKED BY AUTOMOTIVE FLEET LEASE RECEIVABLES
Blue Ridge Asset Funding Corp. (Blue Ridge), Wachovia Bank's
(Aa2/Prime-1/B+) partially supported, multiseller ABCP
conduit, added a partially supported, $200 million
revolving loan facility backed by automotive fleet lease receivables originated
by one of the largest unrated corporate fleet leasing companies in the
United States. 5.5% transaction-specific credit
enhancement in the form of overcollateralization is provided, with
a floor of $5 million. Program-level credit enhancement
was increased by 10% of Blue Ridge's outstanding interest in this
facility. Blue Ridge is authorized to issue approximately $6.2
billion of ABCP. Currently, Blue Ridge has about $3.1
billion in ABCP outstanding, with $75.27 million of
program-level credit enhancement.
HSBC AMENDS BRYANT PARK PROGRAM
Bryant Park Funding is an HSBC conduit that was originally structured
as a hybrid conduit. Thus, Bryant Park initially combined
the features of several types of ABCP programs, including partially
supported multiseller trade receivables program, securities credit
arbitrage, and maturity-matched asset financing. During
the second quarter of 2003, Bryant Park amended its program documents
to remove the securities credit arbitrage and maturity matched financing
Bryant Park now may purchase traditional term and trade receivables,
and may purchase highly rated securities subject to review by Moody's.
The program will now be a more traditional ABCP program, and will
issue only short term ABCP with maturities of up to 270 days.
Bryant Park's program-wide credit enhancement was increased from
5% of outstandings with a $20 million floor, to 8%
of outstandings with a $50 million floor. This change strengthens
the conduit. Other changes to the program include the addition
of a requirement to cease issuing ABCP that will occur when 20%
of the program wide credit enhancement has been drawn for a 5 business
PRIME-1 RATING OF HUDSON CASTLE'S FENWAY FUNDING LLC'S ABCP CONFIRMED
Moody's has confirmed the Prime-1 rating of Fenway Funding LLC,
an extendible asset-backed commercial paper (ABCP) program sponsored
by Hudson Castle Group, Inc.
This action follows the confirmation of the Prime-1 rating of ZCM
Matched Funding Corp. (ZCMMF), a liquidity provider for Fenway
Funding. ZCMMF's Prime-1 rating, which is based upon
a surety bond provided by Zurich Insurance Company, was confirmed
on May 30, 2003. ZCMMF's Prime-1 rating had been placed
on review for downgrade on February 27, 2003 following a similar
rating action with respect to Zurich Insurance Company (ZIC) on February
27, 2003. Fenway has approximately $1.7 billion
in outstanding ABCP.
WESTLB'S PARADIGM ADDS $200 MILLION REVOLVING LOAN FACILITY BACKED
BY VEHICLE FLEET LEASE RECEIVABLES
WestLB AG's (Aa1/Prime-1/D, bank financial strength rating
on review for possible downgrade) Paradigm Funding LLC (Paradigm),
a partially supported multiseller conduit, added a $200 million
revolving loan facility backed by automobile and truck fleet lease receivables
originated by one of the largest unrated corporate fleet leasing companies
in the United States. Seven per cent of deal-specific credit
enhancement in the form of overcollateralization is being provided.
Program-level credit enhancement has been increased by 10%
of the purchase facility. Currently, Paradigm has over $7.1
billion in ABCP outstanding, with $563 million in program-level
credit enhancement. Paradigm is now authorized to issue about $
9.3 billion of ABCP.
COUNTRYWIDE'S PARK GRANADA LLC INCREASES AUTHORIZED AMOUNT TO $13.25
Park Granada LLC, a single-seller mortgage loan warehouse
facility sponsored by Countrywide Home Loans Inc.(A3/Prime-2),
a wholly owned subsidiary of Countrywide Financial Corp. (A3) has
increased its authorized amount from $10 billion to $13.25
billion. With this $3.25 billion increase,
Park Granada is now authorized to issue $12.667 billion
in Prime-1-rated short term notes. The short term
notes benefit from a total of 5% credit enhancement, provided
in the form of a 0.60% cash collateral account and 4.4%
in unrated subordinated variable funding notes.
CIBC'S SPARC ADDS $75 MILLION VFN BACKED BY PREMIUM FINANCE INSTALLMENT
Special Purpose Accounts Receivable Corp. (SPARC), a partially
supported, multiseller conduit sponsored by Canadian Imperial Bank
of Commerce (CIBC)(Aa3/Prime-1/B), has purchased a $75
million variable funding note backed by premium finance installment contracts
originated by one of the largest premium finance companies in the United
States. The originator is unrated. Transaction-specific
credit enhancement, in the form of overcollateralization and a letter
of credit, is a minimum of 13%. The overcollateralization
(minimum of 8%) increases dynamically based upon the performance
of the pool of receivables. Liquidity provided by Prime-1-rated
CIBC partially supports the transaction. Program credit enhancement
was increased by 10% for this asset. SPARC is now authorized
to issue approximately $4.3 billion of ABCP.
For a more detailed description of these ABCP programs, see Moody's
GLOBAL ASSET-BACKED BACKED COMMERCIAL PAPER MARKET REVIEW,
which is published quarterly at http://www.moodys.com.
Structured Finance Group
Moody's Investors Service
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service