MOODY'S ABCP RATING ACTIONS FOR THE SEVEN DAY PERIOD ENDED MARCH 10, 1999
MOODY'S ASSIGNS PRIME-1 RATINGS TO ROYAL BANK OF SCOTLAND'S LOCH NESS ABCP PROGRAMS
Moody's has assigned Prime-1 ratings to the ABCP of Loch Ness Limited (Loch Ness) and its US subsidiary, Ness L.L.C. (Ness). Loch Ness can issue Euro commercial paper; however, it is expected that ABCP will be issued primarily in the US market through Ness. The Loch Ness/Ness programs are newly established, partially supported programs sponsored by Royal Bank of Scotland plc (RBS) (Aa3/Prime-1/B). They have been organized as multiseller ABCP programs to purchase various asset types. All asset pools purchased by Loch Ness/Ness will be subject to rating agency approval.
Program-level credit enhancement, in the form of a letter of credit provided by RBS, has a minimum amount of $25 million. A liquidity loan facility and swingline facility initially provided by Prime-1-rated RBS will equal the face amount of ABCP. RBS will also act as program administrator, collateral agent, hedging agent and counterparty.
The first pool of assets to be purchased by the programs is intended to be a portfolio of investment-grade asset-backed term securities. The portfolio, which is initially about $1 billion, can grow to $2.5 billion. For the Loch Ness/Ness programs to continue to fund, or increase the size of, the securities portfolio, a set of predetermined investment guidelines which specify credit quality, diversity and concentration restrictions must be complied with. For Loch Ness/Ness to be able to purchase a security, the security must have a Moody's rating of at least Baa3 at the time of purchase. Interest rate and currency mismatches are to be covered by hedging arrangements entered into with highly rated counterparties. The initial securities portfolio will have credit enhancement in the form of a letter of credit provided by RBS or other Prime-1 rated providers, which is only available to absorb losses on the securities portfolio and is not available to cross collateralize any other asset pool.
Unlike many securities purchasing programs funded through ABCP, these programs may hold securities rated less than A1 without full credit enhancement for those securities. In fact, the parameters of the programs allow for holdings (at relatively small permitted levels in total and by obligor) of securities rated at the Baa3 level. These parameters also allow for the holding of a small amount (up to 15%) of securities not rated by Moody's. Loch Ness/Ness are authorized to issue up to $2.5 billion of ABCP. For details, see Moody's press release dated March 11, 1999.
THE FOLLOWING ABCP PROGRAMS WERE CONFIRMED AT PRIME-1 BY MOODY'S DURING THE SEVEN DAY PERIOD ENDED MARCH 10, 1999:
SUPPORT FOR FIRSTMAC PROGRAM IS TRANSFERRED FROM UBS TO CIBC
Moody's confirmed the Prime-1 rating of Firstmac Securities Pty Ltd. following the proposed transfer of the program's underwriting and liquidity facilities to Prime-1-rated Canadian Imperial Bank of Commerce (CIBC) from UBS Australia Limited. Firstmac is a fully supported, single-seller Australian ABCP program sponsored by First Mortgage Corporation Australia Limited. After the novation, investors in Firstmac's ABCP will have a direct exposure to CIBC. FirstMac is authorized to issue up to A$100 million of ABCP. For details, see Moody's press release dated March 7, 1999.
NATIONSBANK'S KITTY HAWK PROGRAM INCREASES MAXIMUM PROGRAM SIZE TO $10 BILLION
The maximum authorized issuance amount for Kitty Hawk Funding Corp., one of three fully supported, multiseller programs sponsored by NationsBank, has increased from $8 billion to $10 billion. Kitty Hawk's program-level letter of credit, which is provided primarily for the benefit of liquidity banks, is now sized at a maximum of $800 million or 8% of outstanding ABCP. As of December 31, 1998 Kitty Hawk had extended purchase limits totaling $4.75 billion to 31 different sellers.
LIBERTY STREET BUYS INTO "CLUB" USED AUTO DEAL
Liberty Street Funding, Bank of Nova Scotia's partially supported, multiseller ABCP program, purchased its sixth asset: a $300 million interest in a revolving pool of simple interest retail installment contracts for new and used vehicles originated by an unrated division of a diversified services company. Liberty Street's investment is supported by overcollateralization equal to 7% of the pool. Additional support is provided by the 10% program-level credit enhancement. In addition to the credit support, structural protections, principally performance-based triggers that require Liberty Street to immediately cease issuing ABCP and draw liquidity if the pool credit quality declines, have been incorporated into the deal. Liberty Street is now authorized to issued up to $805 million in ABCP.
MONTAUK PURCHASES $80 MILLION "C" CLASS CREDIT CARD SECURITY
Montauk Funding Corporation, a partially supported, multiseller program sponsored by Westdeutsche Landesbank, purchased an $80 million collateral invested amount (CIA) originated by a major credit card bank. Montauk was established by West LB in August of 1998 principally to purchase credit card securities.
NATIONAL MUTUAL'S MUSTANG PROGRAM MAKES ITS FOURTH INVESTMENT
Moody's confirmed the Prime-1 rating of Mustang No.1 Trust, a partially supported Australian ABCP program sponsored by National Mutual Holdings Limited, following the proposed addition of its fourth investment: A$278 million in pass through, floating rate mortgage-backed securities (MBS). Like the three previous purchases of MBS by Mustang over the past six months, the MBS are rated Aaa by Moody's. After this purchase, Mustang will be authorized to issue up to A$578 million in ABCP. For details, see Moody's press release dated March 7, 1999.
For a more detailed description of these ABCP programs, see Moody's GLOBAL ASSET-BACKED COMMERCIAL PAPER MARKET REVIEW, which is published quarterly.
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