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Rating Action:

MOODY'S ASSIGNS DEFINITIVE RATING OF PRIME-1 TO COMMERCIAL PAPER ISSUED BY CORAL CAPITAL LIMITED

01 Dec 2003
MOODY'S ASSIGNS DEFINITIVE RATING OF PRIME-1 TO COMMERCIAL PAPER ISSUED BY CORAL CAPITAL LIMITED

London, 01 December 2003 -- Moody's has assigned a definitive rating of Prime-1 to the asset-backed commercial paper ('ABCP') issued by CORAL Capital Limited ('Coral'). Coral is a newly established partially supported ABCP programme sponsored by A2/Prime-1/D rated DZ Bank AG Deutsche Zentral-Genossenschaftsbank ('DZ Bank'). Coral will issue ECP and also USCP with Coral Capital, LLC, its wholly owned US subsidiary acting as co-issuer.

CORAL IS DZ BANK'S FIRST 'HYBRID' ABCP CONDUIT.

DZ Bank, through its New York branch sponsors Autobahn Funding; however Coral is DZ Bank's first ABCP conduit in Europe and its first hybrid conduit. Coral has been established by DZ Bank as part of its strategy for facilitating its client business primarily originated within Europe. In addition Coral is a 'hybrid' in that it will also be used as a securities arbitrage vehicle and to achieve regulatory capital relief for assets held on balance sheet by DZ Bank. This flexibility gives it similarities to the Opusalpha programme established this year by Helaba and the Giro Lion programme set up mid-2002 by Bayerische Landesbank and continues the trend toward growth in the number of European conduits sponsored by German banks.

DZ Bank has appointed Deutsche Bank AG, London, as programme administrator. For DZ Bank, the rationale for appointing a separate administrator is to gain regulatory and cost advantages and to enable DZ Bank itself to focus more on the origination process. Moody's considers Deutsche Bank's experience in conduit administration a positive feature for this programme. Deutsche Bank will undertake day-to-day administration of Coral, including issuance of ABCP, monitoring of transactions and ensuring timely draws of liquidity and credit enhancement if required.

DIVERSE ASSET TYPES WILL BE ELIGIBLE TO BE FINANCED

Coral will use the proceeds from the issue of ABCP to advance funds to purchasing vehicles, (the 'Purchasers') under loan agreements and the Purchasers will use these funds to acquire or finance various types of assets. The assets, which may include trade and term receivables, ABS, other debt instruments and synthetic obligations can be broadly classified into three types:

1.Client transactions originated and structured by DZ Bank in respect of which receivables are sold to the Purchaser (multi-seller leg);

2.Highly rated securities purchased by the Purchaser pursuant to pre-agreed investment criteria (to be agreed with Moody's) (credit arbitrage leg); and

3.Synthetic transactions via credit default swaps or other synthetic instruments financed by the Purchaser and linked to the performance of a reference portfolio of assets.

RATING OPINION

The Prime-1 rating of Coral's ABCP is based on, among other factors, the following:

Moody's review of all assets prior to acquisition, except for highly rated securities purchased in accordance with pre-agreed investment criteria.

The provision for a cease issuance of commercial paper should Coral fail to maintain the required credit enhancement.

Liquidity support to be arranged with Prime-1 rated institutions with a funding basis of non-defaulted assets plus senior costs and expenses.

Hedging arrangements to be arranged with Prime-1 rated counterparties, which mitigate interest rate and currency risk.

Letters of credit (L/C) to be provided by Prime-1 rated institutions to Coral in total equal to 5% of the outstanding ABCP (other than highly rated securities), initially provided by DZ Bank subject to a floor amount of Euro 1 million.

Required credit enhancement formula in relation to highly rated securities that protects against deterioration of the credit quality of the assets held through the credit arbitrage leg.

Structural protections which ensure the bankruptcy remote nature of Coral, the co-issuer and the Purchasers.

Adequate expense coverage through liquidity borrowing base and the floor L/C.

The capabilities of DZ Bank as programme sponsor and Deutsche Bank AG as programme administrator.

CREDIT ENHANCEMENT

There are two forms of credit enhancement available to protect investors, seller-specific and programme-wide. Seller-specific credit enhancement may be in the form of a cash fund, over-collateralisation, a subordinated loan from the seller and/or other forms of credit enhancement commensurate with Coral's prime-1 rating. It is expected that seller will provided credit enhancement will be in the first loss position.

DZ Bank and other Prime-1 rated institutions will provide programme-level credit support to Coral in the form of (a) an irrevocable L/C provided by DZ Bank in relation to the "floor" programme wide credit enhancement of Euro 1 million and (b) 5% of ABCP issued in connection with each pool addition (other than highly rated securities).

Coral may draw on programme-level credit support for losses in excess of pool-specific credit enhancement and to pay incidental senior costs and expenses. The programme-wide credit enhancement will be available to all asset pools.

LIQUIDITY

Coral's liquidity will be provided to the Purchasers level by Prime-1 rated institutions in relation to each asset pool, but may be drawn the issuer to repay any shortfall in ABCP. In general liquidity will fund for non-defaulted assets and senior expenses and will not be available if Coral or the related Purchaser is insolvent. DZ Bank, will act as liquidity agent under the liquidity facilities. Instead of employing a swing-line, DZ Bank's New York branch will act as a paying office for liquidity draws to ensure that USCP is paid in a timely manner.

HEDGING

Coral is required to have appropriate hedging agreements in place to protect investors from any interest rate or currency risk. Deutsche Bank AG, London, in its role as programme administrator will be required to ensure that prior to each issuance of ABCP adequate hedges are in place with Prime-1 rated counterparties.

ORIGINATION AND ADMINISTRATION

DZ Bank's principal responsibilities as programme sponsor are (a) to originate, underwrite and structure client transactions and bank balance sheet assets, (b) identify highly rated securities to be purchased, (c) provide day-to-day advice, on request, in relation to conduit administration and (d) arrange and structure any necessary hedging agreements.

Deutsche Bank's principal responsibilities as programme administrator are to monitor the various pools over time and provide day-to-day conduit administration. Deutsche Bank has gained considerable experience acting in a third part administration role for various European and US ABCP programmes in local and global ABCP markets and has included the management of a diverse range of programme and asset types.

Moody's has recently met with DZ Bank in Frankfurt to discuss DZ Bank's strategic plans for Coral and has also recently met with Deutsche Bank in London to review Deutsche Bank's conduit management systems and procedures. Moody's believes that they are each adequate to respectively oversee and manage the programme. Bedell Cristin Trust Ireland Limited will be the corporate services provider for Coral, and Lord Securities Corporation will act in that capacity for the co-issuer.

A more detailed description of the Coral programme will be published in a forthcoming issue of Moody's GLOBAL ASSET-BACKED COMMERCIAL PAPER MARKET REVIEW. The performance of Coral will be noted in Moody's ABCP MARKET SUMMARY, published monthly. MONTHLY PERFORMANCE OVERVIEWS will be available on Moodys.com.

London
Frederic Drevon
Managing Director
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454

London
Paul Kerlogue
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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

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