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28 Oct 2004
MOODY'S ASSIGNS PRIME-1 RATING TO LANDALE FUNDING Ltd, A NEW ABCP PROGRAMME SPONSORED BY HBOS TREASURY SERVICES PLC
Maximum Commmercial Paper Issuance of $15bn
London, 28 October 2004 -- Moody's Investors Service has assigned a Prime-1 rating to the
asset-backed commercial paper (ABCP) issued by Landale Funding
Limited (Landale) under a newly established, partially supported
ABCP programme sponsored by HBOS Treasury Services plc.
PROGRAMME STRUCTURE: Landale may issue ABCP in the US or Euro ABCP
markets. The proceeds of ABCP issuance are used by the issuer to
purchase asset backed notes. To qualify for purchase under the
programme, the proposed investments must have a Moody's rating of
at least Aa3 or be structured in such a way as to be consistent wit Landale's
Prime-1 rating. Investors in Landale are not exposed to
changes in the market value of the assets: the main risk they face
is a rapid decline in the credit quality of the assets. Unlike
credit arbitrage programmes, separate liquidity arrangements will
be entered into in relation to each new asset financed by Landale and
each of Landale's assets will be subject to prior review and rating affirmation
by Moody's. It should be noted that a significant portion of the
assets are expected to be assets originated by HBOS affiliates.
RISK OF ASSET DEFAULT: The main risk posed to investors is the migration
of the rating assigned to an asset financed by Landale from the time of
purchase to default during the time when ABCP may be outstanding (which
may be up to 390 days). Default is defined as the point when liquidity
banks will not provide funds for the asset (which is generally when it
is downgraded to below Caa1). This risk is addressed for Landale
by (i) a trigger that stops issuance of ABCP if an assets is downgraded
below Aa3 (where liquidity funding is subject to a borrowing base test)
and (ii) a prohibition on the issuance of ABCP if the conduit does not
have the required enhancement.
EXTENDABLE NOTES: Landale is authorised to issue extendable notes
and callable notes (together "Liquidity Notes"). Extendable notes
may have expected maturity dates of up to 364 days and final maturity
dates of up to 390 days while callable notes may have initial call dates
of up to 270 days and final maturities of 364 days. Liquidity Notes
will be repaid on their expected maturity or initial call date unless
extended by Landale. During the extension period, Liquidity
Notes will accrue interest at a rate per annum equal to one month LIBOR
plus 0.25%. Landale may issue Liquidity Notes in
order to reduce the likelihood of it being required to draw on its bank
liquidity facility. However, unlike some other ABCP programmes,
Landale cannot use Liquidity Notes as a means of reducing the required
amount of committed bank liquidity. On the expected maturity date
for Liquidity Notes and on each date during the extension period on which
the variable interest rate is reset, HBOS Treasury Services,
as Administrator will determine whether the commitment under the liquidity
facility provided by HBOS plc, its affiliates or other Prime-1
rated financial institutions is sufficient to cover the face amount of
outstanding ABCP, including interest on Liquidity Notes that will
accrue up to the next interest payment date. If the Administrator
determines that there will be a shortfall on the next interest payment
date, liquidity will be drawn immediately to repay Liquidity Notes.
It follows that the liquidity commitment will always be sufficient to
cover both the principal and accrued interest in relation to Liquidity
Notes. However, investors should note that the amount of
liquidity available to be drawn may be reduced in the event that assets
FLOATING-RATE ABCP: Landale is authorised to issue floating-rate
ABCP. Whereas traditional ABCP either bears interest at a fixed
rate or is issued at a discount, floating rate ABCP bears interest
at a rate that is reset periodically by reference to a benchmark index,
such as LIBOR. The risk of interest rate volatility associated
with Landale's floating-rate ABCP will be fully hedged by swap
or floating rate agreements between Landale and Prime-1 rated counterparties.
Landale's liquidity facilities will be sized to cover its fixed-rate
payment obligations under such hedging arrangements.
RATING OPINION: The Prime-1 rating of Landale is primarily
"The high credit quality of its underlying assets
"The Programme Wind Down if there is a Programme deficiency
"The provision for a cease issuance of commercial paper in relation to
any asset that is rated below Aa3 (other than where fully supported by
a Prime-1 rated entity)
"The Prime-1 rating of HBOS Treasury Services' short-term
"The bankruptcy remote nature of the programme
CREDIT ENHANCEMENT: If an Asset Purchasing Company is required to
obtain credit enhancement in relation to an interest in an asset,
it will be required to use the proceeds of any drawing to repay Landale,
which will use that payment to fund payments of ABCP. Landale may
not issue ABCP if at the time of such issuance there is not sufficient
available enhancement to cover the required enhancement amount.
The required amount is an amount equal to the product of 5% and
the aggregate principal balance of all outstanding assets (excluding HBOS
assets and any over-collateralization amounts) relating to assets
that are not rated by Moody's. No credit enhancement will be available
in relation to HBOS assets the rating of these assets will determine their
eligibility for financing by Landale without the need for additional enhancement.
PROGRAMME ADMINISTRATOR: HBOS Treasury Services will act as Administrator
for Landale. Its duties will include the administration of (a)
the issuance, sale and timely payment of ABCP, (b) funding
for the asset purchasing companies, (c) obtaining funding under
liquidity arrangements or program enhancement, (d) required hedging
arrangements and (e) compliance with applicable securities laws by Landale.
HBOS Treasury Services will provide similar services for each of the asset
purchasing companies and, in addition, it will identify assets
and assist with the acquisition, maintenance and enforcement of
The performance of assets funded by Landale will be noted in Moody's ABCP
MARKET SUMMARY and MONTHLY PERFORMANCE OVERVIEWS. Furthermore,
Moody's will provide detailed up-dates about the programme through
its GLOBAL ASSET-BACKED COMMERCIAL PAPER MARKET REVIEW.
All the above research will be available on moodys.com.
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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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