MOODY'S ASSIGNS PRIME-1 RATING TO DEUTSCHE BANK'S SARATOGA FUNDING CORPORATION ABCP PROGRAM
Moody's Investors Service has assigned a Prime-1 rating to the asset-backed commercial paper (ABCP) to be issued by Saratoga Funding Corporation ("Saratoga"). Saratoga is a partially supported, multiseller ABCP program administered by Deutsche Bank AG (Aa3/P-1/B-, "DB"). Saratoga's program structure is very similar to those of Tahoe Funding Corporation ("Tahoe") and Sedona Capital Funding Corporation ("Sedona"), two other Prime-1 rated programs administered by DB.
Saratoga is a limited purpose corporation established according to Delaware law. All transactions contemplated for Saratoga will be subject to Moody's prior review. Saratoga will not issue ABCP to the public. Instead, all ABCP issued by Saratoga will be purchased by Gemini Securitization Corporation ("Gemini"), another DB-administered program that is rated Prime-1 by Moody's. Gemini in turn will issue ABCP to investors on a match-funded basis. At closing, Saratoga has not funded any asset interests and has no ABCP outstanding.
Saratoga's Prime-1 rating is based on, among other factors, the prior review requirement for all asset purchases to ensure the asset quality is consistent with the Prime-1 rating, liquidity and credit support provided by Prime-1 rated banks, structural protections to preserve the bankruptcy-remoteness of the conduit and the experience and capability of Deutsche Bank in its role as administrator of the program.
PROGRAM CREDIT ENHANCEMENT AT THE GEMINI LEVEL
Unlike other conventional multiseller ABCP programs, Saratoga's ABCP will not have "program-level" credit enhancement. Instead "program-level" credit enhancement will be provided at the Gemini level. As a condition to purchasing Saratoga ABCP, Gemini must hold credit enhancement with respect to Saratoga assets according to Saratoga's program guidelines. Note that the program credit enhancement guidelines for Saratoga and Gemini are very similar.
LIQUIDITY SUPPORT AT THE SARATOGA LEVEL
Liquidity support for Saratoga's ABCP will be provided at the Saratoga level through liquidity loan agreements with Prime-1 rated banks. The liquidity facility will typically fund up to the amount of non-defaulted assets. The commitment amount under the liquidity agreement will equal 102% of the asset purchase limit for a transaction. Because of the matched funding requirement for Gemini ABCP with respect to Saratoga ABCP, a failure to roll Gemini's ABCP due to a market disruption means a failure to roll Saratoga's ABCP, and this will result in a draw in Saratoga's liquidity to ultimately repay Gemini's ABCP. Moody's has reviewed the timing of these events and Deutsche Bank's role as administrator, and believes they are consistent with the Prime-1 rating.
PRIOR REVIEW OF ALL ASSET PURCHASES
Moody's will review each asset pool prior to purchase to assess the risk and to ensure that it is consistent with the Prime-1 rating. Because Gemini is the sole purchaser of Saratoga's ABCP, it is anticipated that each asset pool in Saratoga's portfolio will be reviewed as if it were purchased under the Gemini investment policy and program enhancement guidelines. According to Moody's, any significant deterioration in the credit quality of any asset pool in Saratoga's portfolio is likely to have a negative impact on both Saratoga's and Gemini's ratings.
Deutsche Bank will act as administrator for Saratoga. Deutsche Bank's current long and short-term debt ratings are Aa3 and P-1, respectively, and its financial strength rating is B-. Deutsche Bank sponsors a number of ABCP conduits that are rated Prime-1 by Moody's and has significant experience in administering and managing ABCP programs.
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