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Rating Action:

MOODY'S ASSIGNS Aaa TO THE GOLDEN JADE SYNTHETIC CDO MANAGED BY AGRICULTURAL BANK OF CHINA

23 Jun 2003
MOODY'S ASSIGNS Aaa TO THE GOLDEN JADE SYNTHETIC CDO MANAGED BY AGRICULTURAL BANK OF CHINA

US$57.5 Million of Asset-Backed Securities Rated

Hong Kong, June 23, 2003 -- Moody's Investors Service has assigned the long-term rating of Aaa to the Class A floating rate notes issued jointly by Golden Jade CDO Limited and Golden Jade CDO LLC (together, the co-issuers). At the same time, Moody's has also assigned the ratings of Aa1 to the Class B floating rate notes and A3 to the Class C floating rate notes issued by the co-issuers. The transaction is a synthetic CDO transaction and brought to the market by Lehman Brothers International (Europe) with Agricultural Bank of China as the portfolio manager. The complete rating action is as follows:

Co-Issuers: Golden Jade CDO Limited and Golden Jade CDO LLC

US$20,000,000 Class A Floating Rate Notes due 2006, rated Aaa

US$10,000,000 Class B Floating Rate Notes due 2006, rated Aa1

US$27,500,000 Class C Floating Rate Notes due 2006, rated A3

The ratings are primarily based on the following factors:

1. the credit quality of the underlying reference entities

2. the diversity of the underlying reference entities

3. the credit quality of General Electrical Capital Corporation (Aaa), who guarantees the payment obligations of FGIC Capital Market Services, Inc. pursuant to an investment agreement

4. the partial CDS premium payable in advance to the issuer by Lehman Brothers Special Financing Inc. (the "CDS counterparty")

5. the credit quality of Lehman Brothers Holdings Inc. (A2/Prime-1), who guarantees the obligations of the CDS counterparty pursuant to the CDS

6. the credit enhancement provided to each of the class A, class B and class C notes and their respective payment and loss allocation priority

7. the retention of excess spread as additional credit enhancement and

8. the legal and structural integrity of the transaction.

The ratings address the timely payments of interest and the ultimate repayment of principal at par by the legal final payment date in November 2006. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks, such as those associated with the timing of principal prepayments, have not been addressed and they may have a significant impact on the yield to investors.

TRANSACTION SUMMARY

The current transaction is an arbitrage synthetic CDO transaction managed by a portfolio manager in China. The issuer has invested the note proceeds with FGIC Capital Market Services, Inc. under an investment agreement (the permitted investment). The obligation of FGIC Capital Market Services, Inc. under the investment agreement are guaranteed by General Electric Capital Corporation which is Aaa-rated by Moody's.

At the same time, the issuer will enter into a credit default swap (the "CDS") with Lehman Brothers Special Financing Inc. (the "CDS counterparty") with respect to a portfolio of 120 reference entities. As of the closing date, the total reference notional amount is US$ 1 billion and each reference entity would have a reference entity notional amount of approximately US$8.33 million. Under the CDS, the issuer will provide credit protection to the CDS counterparty who in return will pay CDS premium to the issuer until the scheduled final payment date in May 2006. CDS counterparty's obligations under the CDS is guaranteed by Lehman Brothers Holdings Inc. (rated A2 by Moody's).

In each period, the CDS premium will be paid in two instalments --- 1) the initial CDS premium and 2) the additional CDS premium. The initial CDS premium is paid in advance to cover the expected senior fees and expenses and required spread of note interests (after accounting for the interests earned on the permitted investment). The additional CDS premium to be paid in arrears is equal to the total CDS premium minus the initial CDS premium together with the interests thereon.

The initial CDS premium together with the interests thereon and interests earned on the permitted investments will be used by the co-issuers to pay certain senior fees and expenses and interest payments on the notes. Any excess funds after satisfying the above payments together with the additional CDS premium will be retained in a reserve account to provide additional credit enhancement to cover potential losses arising from the payment of credit protection amounts and substitution of the underlying reference entities.

The transaction will adopt a settle-at-the-end structure. On the scheduled final payment date, the permitted investments and the balance in the reserve account (if any) will be used in the following order: (1) to repay any unpaid credit protection amount owing to the CDS counterparty, (2) to build up a contingent payment reserve, and (3) to repay the noteholders. The contingent payment reserve is set up to meet the credit protection payment obligations of the issuer for those unsettled credit events occurring on or prior to the scheduled final payment date. The order of priority of principal payments will start from the Class A notes, followed by the Class B notes, and finally the Class C notes. On each payment date after the scheduled final payment date, holders of the outstanding notes will only receive, based on the outstanding principal balance of the respective notes, a pro rata share of the interests earned from the investment of the contingent payment reserve.

During the term of the transaction and subject to satisfaction of certain criteria, Agricultural Bank of China (Baa1/Prme-2/E), as the portfolio manager, will be allowed to substitute four underlying reference entities each year.

THE REFERENCE PORTFOLIO

As of the closing date, the underlying reference portfolio consists of one hundred and twenty (120) reference entities, and with an aggregate notional amount of US$ 1 billion. Each reference obligation has a reference entity notional amount of approximately US$8.33 million. These reference entities have a weighted average credit quality of Baa1/Baa2 and a diversity score of 72. The reference portfolio is well diversified in terms of industry composition with reference entities coming from 31 different industries out of the 33 Moody's industry classifications. The top 6 industries are banking (7.5%), telecommunications (7.5%), insurance (7.5%), buildings and real estate (6.7%), retail stores (6.7%), and utilities (6.7%) respectively. In terms of geographical distribution, the underlying reference entities as of the closing date are predominately US and European entities with approximately 67% of the reference entities in the US, 22% in Europe while the remaining 11% in Asia and Australia.

MOODY'S ANALYSIS

Apart from the credit quality and characteristics of the underlying reference entities, Moody's also considers other issues such as the definition of credit events, the reference obligations, the deliverable obligations, the settlement procedures, cash flow and loss distribution priorities, and the permitted investment arrangement in constructing the cash flow model.

To determine the amount of credit enhancement required for each class of the notes, Moody's performs a multi-binomial expansion analysis, which is an extension of the single binomial expansion technique. Multiple binomial analysis is particularly useful to account for a wide range of rating distribution of the portfolio that might have a material impact on the ultimate expected loss of the rated notes.

A more detailed analysis of the transaction will soon be available at Moody's web site in the New Issue Reports section: http:// www.moodys.com.

THE PORTFOLIO MANAGER

Agricultural Bank of China (Baa1/Prime-2/E) is the portfolio manager of this transaction. It is a wholly state-owned commercial bank incorporated in 1979 in Beijing. It has registered with People's Bank of China as a "Fixed-income Securities Dealer". It provides investment management services to institutional investors and high net worth individuals, primarily in the PRC. Its principal areas of business include deposit-taking and lending, clearance and settlement, asset management and investment advice. As of 30 April 2003, the total assets under its management were about US$18 billion.

The securities will not be registered under the Securities Act of 1933 (the Act) under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance will be designed to permit resale under Rule 144A.

Moody's Investors Service is a publisher of rating opinions and research. It is not involved in the offering or sale of any securities, nor is it acting on behalf of the offering party. This release is not a solicitation or a recommendation to buy, hold or sell securities.

Hong Kong
Michael M. Ye
Managing Director
Structured Finance Group
Moody's Asia Pacific Ltd.
Telephone: 852-2509-0200
Facsimile: 852-2509-0165

Hong Kong
Jerome Cheng
Vice President - Senior Analyst
Structured Finance Group
Moody's Asia Pacific Ltd.
Telephone: 852-2509-0200
Facsimile: 852-2509-0165

No Related Data.
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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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