MOODY'S ASSIGNS PRIME-1 RATING TO OLD COURT FUNDING, A NEW ABCP PROGRAMME SPONSORED BY CAMBRIDGE PLACE INVESTMENT MANAGEMENT LLP
Maximum programme amount of $5 billion
London, 23 December 2004 -- Moody's Investors Service has assigned a Prime-1 rating to the
asset-backed commercial paper (ABCP) issued by Old Court Funding
PLC, a newly established, partially supported, credit
arbitrage ABCP programme sponsored by Cambridge Place Investment Management
PROGRAMME STRUCTURE: Old Court may issue ABCP in the US or Euro
ABCP markets. The proceeds of ABCP issuance are used by the issuer
to make loans ("PE Loans") to purchasing entities, which in turn
purchase financial assets from funds and other vehicles managed by Cambridge.
Initially there is only one purchasing entity, but others may be
added in the future, subject to ratings affirmation. The
structural features described in this press release refer to the first
purchasing entity only and may not apply to future purchasing entities.
The assets funded by the proceeds of the first PE Loan must have a Moody's
rating, or be otherwise eligible for funding pursuant to the programme
documentation. As with other credit arbitrage conduits, investors
in Old Court 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
USE OF MOODY'S CDOROM™ v2.0: The first PE Loan is not
rated by Moody's. However, Cambridge uses Moody's CDOROM™
v2.0 to obtain a rating forecast for the PE Loan (a "Rating Forecast").
Rating Forecasts are based upon certain modeling assumptions and inputs
that may not be the same as the assumptions and inputs Moody's would use
if it were to assign an actual rating to the PE Loan. It is a condition
to issuance that the Rating Forecast is at least Aa2 and the liquidity
facility (provided by Prime-1 rated Barclays Bank PLC) is available
to repay ABCP in full provided that the Rating Forecast does not fall
below Caa2. Therefore, investors are exposed to the risk
that a Rating Forecast migrates from Aa2 or above to below Caa2 over 364
days (the maximum tenor of ABCP). Moody's considers this risk to
be commensurate with Prime-1. For more details on Moody's
CDOROM™ v2.0, please see Moody's Press Release dated
Nov. 30 2004.
EXTENDABLE AND CALLABLE NOTES: Old Court is authorised to issue
extendable notes (ECNs) or callable notes with expected maturity dates
or call dates of up to 270 days and final maturity dates of up to 364
days. ECNs shall be repaid on their expected maturity date unless
extended by Old Court. Callable notes may be called by Old Court
on their call date. During the extension period, ECNs and
callable notes will accrue interest at a rate per annum equal to one month
LIBOR/EURIBOR plus 0.25%.
Old Court may issue ECNs or callable notes in the US or ECP markets in
order to reduce the likelihood of it being required to draw on its bank
liquidity facility. However, unlike some other ABCP programmes,
Old Court cannot use ECNs or callable notes as a means of reducing the
required commitment amount of bank liquidity. On each expected
maturity date and call date and on each date during the extension period
on which the variable interest rate is reset, the Manager will determine
whether the commitment under the liquidity facility provided by Barclays
is sufficient to cover, inter alia, the face amount of outstanding
ABCP, including interest on ECNs and callable notes that will accrue
up to the next interest payment date. If the Manager determines
that there will be a shortfall on the next interest payment date,
liquidity will be drawn immediately to repay the relevant ECNs and callable
notes. It follows that the liquidity commitment will always be
sufficient to cover both the principal and accrued interest in relation
to ECNs and callable notes. However, investors should note
that the amount of liquidity available to be drawn may be reduced in the
event that the Rating Forecast is below Caa2.
FLOATING-RATE ABCP: Old Court 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 Old Court's floating-rate ABCP shall be fully hedged by way
of swap agreements between Old Court and P-1 rated counterparties.
Old Court's liquidity facility will be sized to cover its fixed-rate
payment obligations under such swaps.
RATING OPINION: Old Court's Prime-1 rating is primarily based
on the following:
" The availability of liquidity in an amount sufficient to repay ABCP
in full, so long as each Rating Forecast from CDOROM™ v2.0
is Caa2 or above, combined with the provision for a cease issuance
of commercial paper should the related Rating Forecast be lower than Aa2.
" A requirement for the relevant Rating Forecast to remain at least Aa2
as a condition to any asset substitutions.
" The ability of Cambridge to use Moody's CDOROM™ v2.0 correctly
and the requirement for each Rating Forecast to be verified by QSR (a
wholly-owned subsidiary of The Bank New York (Aa2/P-1))
as independent Programme Administrator.
" Suitable hedging of all FX and interest rate risks.
" Adequate provision for Old Court's expenses.
" The Prime-1 rating of Barclays short-term debt obligations.
" The bankruptcy remote nature of each co-issuer and purchasing
CREDIT ENHANCEMENT: Old Court does not benefit from any programme
wide enhancement. However, transaction specific enhancement
is provided at the purchasing entity level in order to achieve a minimum
Rating Forecast of Aa2. This enhancement may take the form of overcollateralisation,
cash, subordinated notes or committed loan facilities.
The required amount of enhancement is determined in accordance with Moody's
CDOROM™ v2.0, a software tool that helps market participants
model credit risk on the full spectrum of synthetic CDO products.
The tool is the same as that used by Moody's own analysts to analyse CDO
Each Rating Forecast obtained by Cambridge for the purpose of, inter
alia, ABCP issuance, asset substitutions or liquidity drawings,
must be verified by QSR Management Limited (QSR), an independent
administrator which is wholly owned by The Bank of New York. Moody's
has assessed the capabilities of Cambridge and QSR to operate the model
correctly and, in addition, will periodically check the Rating
Forecasts itself. However, the Rating Forecasts are not Moody's
ratings and are not monitored as such.
EXPENSES: Provision for expenses is made separately at the purchasing
entity and issuer level. At the purchasing entity level,
a cash reserve is sized to cover expenses over a 1 year period (i.e.
the maximum tenor of ABCP) plus $150,000 for unexpected expenses.
At the issuer level, liquidity is sized to cover the issuer's expenses
up the last maturity date of outstanding ABCP plus $150,000
for unexpected expenses.
PROGRAMME MANAGER / ADMINISTRATOR: As programme manager, Cambridge
is responsible for, inter alia, running Moody's CDOROM™
v2.0 to obtain Rating Forecasts, checking conditions to issuance
and issuing ABCP, arranging hedging and, if necessary,
drawing liquidity facilities. Cambridge does not manage any other
ABCP conduits, but is an experienced fund manager which also manages
QSR Management Limited (a wholly owned subsidiary of The Bank of New York
(Aa2/P-1)) has been appointed as programme administrator.
QSR's functions include verification of each Rating Forecast, reporting,
cash management and determining whether liquidity needs to be drawn to
repay ABCP. QSR is independent of both Cambridge and Barclays.
It acts as administrator for another ABCP conduit and a structured investment
The performance of assets funded by Old Court 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.
For details on Moody's CDOROM™ v2.0, please see Moody's
Press Release dated Nov. 30 2004.
Structured Finance Group
Moody's France S.A.
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