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Rating Action:

MOODY'S ASSIGNS PRELIMINARY RATINGS TO TWO CLASSES OF EIRLES TWO LIMITED AND TO TWO RELATED CREDIT DEFAULT SWAPS

01 Mar 2004
MOODY'S ASSIGNS PRELIMINARY RATINGS TO TWO CLASSES OF EIRLES TWO LIMITED AND TO TWO RELATED CREDIT DEFAULT SWAPS

JPY1.5 Billion of Debt Securities Affected.

Paris, March 01, 2004 -- Moody's has assigned the following provisional ratings to two Series of Notes issued by EIRLES TWO LIMITED ("Eirles Two"), a bankruptcy-remote SPV incorporated in Ireland:

(P) A1to the JPY 1,000,000,000 Series 81 Floating and Variable Rate Secured Notes; and

(P)Baa2to the JPY 500,000,000 Series 82 Floating and Variable Rate Secured Notes

Moody's has also assigned the following provisional ratings to two Credit Default Swaps entered into by Deutsche Bank AG, London Branch and Eirles Two Limited in the context of the Tsar_05 transaction:

(P) A1to the USD 63,000,000 Class D(2) Swap; and

(P)Baa2to the USD 42,000,000 Class E(2) Swap

This issuance will carry the credit risk associated with a portion of the Tsar_05 swap. Deutsche Bank AG, London Branch ("Deutsche Bank") had entered into this credit default swap with Eirles Two. Eirles Two provides protection on a portion of a diversified portfolio of asset-backed securities for losses exceeding 1.25% and up to 1.85% of the portfolio under the Series 82 Notes (associated with the Class E(2) Swap) and for losses exceeding 1.85% and up to 2.75% under the Series 81 Notes (associated with the Class D(2) Swap).

Moody's ratings on the Series 81 and Series 82 Notes address the ability of Eirles Two Limited to make timely payment of interest and ultimate payment of principal before July 2018. This rating addresses the ability of the issuer to meet this promise not the level of the promise.

The Moody's ratings on the two associated credit default swaps measures the risk on an expected loss basis that the credit protection provider will be required to make payments in respect of credit events under the terms of the transaction until the legal maturity (July 2018). The rating also addresses any premiums due but not paid by the protection buyer, up until an early termination date, if any.

Investors should be aware that if the default swaps mentioned above are early terminated, then Noteholders will be exposed to a lower risk, and will receive a lower interest amount.

These ratings addresses the ability of Eirles Two Limited to make timely payment of interest and ultimate payment of principal before July 2018.

The ratings are based on the following factors:

(i) the current reference portfolio and the eligibility criteria governing future additions to it,

(ii) the level of protection against losses provided through a threshold amount,

(iii) the credit events and pricing mechanics which will determine the extent of any loss,

(iv) the nature and rating of the underlying collateral securing the notes,

(v) the obligations of Deutsche Bank AG, London Branch (Aa3/P-1) as asset swap counterparty and credit-default swap counterparty, and

(vi) the legal and structural integrity of the transaction

All fixed amounts to be paid by Deutsche Bank AG, London Branch under the default swap will be converted from USD into JPY at the initial exchange rate (USD 1.0000 = JPY 105.34)

Eirles Two's obligations under this Series 81 will be collateralised by JPY1bn of Vorarlberger Landes- und Hypothekenbank AG (Austria) currently rated Aaa. The Series 82 Notes will be collateralised with JPY500mn Aa2-rated senior unsecured bonds issued by Hypo Alpe-Adria-Bank AG (Austria).

Eirles Two's obligations to pay any cash settlement amount to Deutsche Bank under the credit-default swap will be satisfied by the delivery to Deutsche Bank of collateral with a nominal principal amount in JPY equal to such cash settlement amount, using the JPY/USD initial exchange rate (USD 1.0000 = JPY105.34). The notes will be written down to reflect any payments under the credit default swap using the USD/JPY initial exchange rate (USD 1.0000 = JPY 105.34). Thus the transaction is essentially insulated against risks other than those of the reference portfolio and the collateral. In particular, Moody's believes that the credit risk, FX risk and market risk taken on the Aaa collateral are consistent with the rating of the notes. This is based on the asset swap signed by Eirles Two and Deutsche Bank which, among others, provides that Deutsche Bank will repurchase the collateral at par from Eirles Two at maturity of the notes or in case of any early termination (other than due to a default of the collateral, a tax event, or an early termination of the swap or the repurchase agreement where Deutsche Bank is not the defaulting party). Moody's notes that if the rating of the collateral is downgraded in the future, it is possible that the rating of the Notes, all things being equal, will be downgraded as a default on the collateral would lead to a loss for the noteholders.

Moody's issues provisional ratings reflecting its preliminary credit opinion regarding the transaction. Upon a conclusive review of the final versions of all the documents and legal opinions, Moody's will endeavor to assign a definitive rating to the transaction. A definitive rating may differ from a provisional rating.

For further detail on TSAR_05 transaction, please refer to the previous press releases (dated June 25th, 2002; October 22nd, 2002 and February 3rd, 2003) and Moody's Pre Sale Report. These may be accessed on www.moodys.com or by contacting Moody's Client Service Desk at + 44 20 7772 5454.

Paris
Paul Mazataud
Managing Director
Structured Finance Group
Moody's France S.A.
Telephone:33 1 53 30 10 73
Facsimile:33 1 42 66 32 20

Paris
Rupert Schoder
Asst Vice President - Analyst
Structured Finance Group
Moody's France S.A.
Telephone:33 1 53 30 10 73
Facsimile:33 1 42 66 32 20

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.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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