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Rating Action:

MOODY'S ASSIGNS RATING OF PRIME-1 TO COMMERCIAL PAPER ISSUED BY CHESHAM FINANCE LIMITED AND CHESHAM FINANCE LLC

Global Credit Research - 20 Aug 2004
MOODY'S ASSIGNS RATING OF PRIME-1 TO COMMERCIAL PAPER ISSUED BY CHESHAM FINANCE LIMITED AND CHESHAM FINANCE LLC

London, 20 August 2004 -- Moody's Investors Service assigns a Prime-1 rating to asset-backed commercial paper ("ABCP") to be issued by Chesham Finance Limited as issuer and Chesham Finance LLC as co-issuer under a programme arranged by BSN Holdings Limited ("BSN") and administered by QSR Management Limited ("QSR"), a wholly owned subsidiary of the Bank of New York (Aa2/Prime-1/B+). The Prime-1 rating is based on the credit and liquidity support provided repurchase agreements and securities lending agreements to be entered into with counterparties rated Prime-1 or whose obligations are supported by a Prime-1 rated entity, and on the strict limits and robust procedures under which the programme will operate.

USE OF REPURCHASE AND SECURITIES LENDING AGREEMENTS TO ACHIEVE MATCH FUNDING - GENERALLY NO LIQUIDITY FACILITIES.

The Issuer is expected to purchase fixed or floating rate instruments including but not limited to commercial paper, certificates of deposit, time deposits, banker's acceptances, asset-backed securities, freely transferable promissory notes, government or corporate bonds, debentures, repurchase agreements, and asset-backed commercial paper.

The Issuer will, in conjunction with the financing of each asset (other than certain highly rated assets), enter into a repurchase agreement ("Repo") or a securities lending agreement ("Loan") under which the counterparties will be obligated to make a payment on or before the maturity date of related ABCP or on demand, in an amount at least equal to the face amount of maturing ABCP. The Issuer will not generally require any liquidity facilities due to the matched maturity profiles of its assets and liabilities. To the extent it does not match its funding, the Issuer will enter into committed liquidity facilities with Prime-1 rated financial institutions to ensure the timely repayment of ABCP.

Chesham will deal only with Prime-1 rated counterparties in relation to its Repos, Loans, hedging and liquidity agreements. It is also permitted to invest in highly rated securities consistent with the Prime-1 rating of the ABCP. Moody's has reviewed the standard forms of agreement the Chesham will use, and the adequacy of its capital and has determined that no additional credit support is necessary to maintain the Prime-1 ratings of the ABCP.

CHESHAM MAY ISSUE EXTENDIBLE ABCP

The Issuer will have the ability to issue extendible ABCP. The Issuer will only do so if the payments received from its Repos, Loans and hedging agreements will enable it to repay ABCP on its final maturity date. This ability will be tested for each possible maturity of extendible ABCP up to its final maturity.

CHESHAM MAY ISSUE ABCP WITH CALL OR PUT FEATURES

The Repos and Loans entered into by the Issuer may have put or call features embedded in them. In order to manage the programme's liquidity, the Issuer will attempt to issue ABCP with features that mirror those of the associated Repo or Loan. Thus, if the Issuer issues ABCP that can be put by the purchaser upon 7 day's notice, the Issuer will purchase an asset that may be put by the Issuer to a counterparty upon 7 or fewer day's notice. If the Issuer cannot issue ABCP with a call or put feature to match the opposing feature of a Repo or Loan, the Issuer will enter into an appropriate hedge and or liquidity agreement to ensure repayment of ABCP.

DAILY NCO, AND SENSITIVITY TESTS TO ENSURE ABCP CAN BE REPAID ON MATURITY

QSR will test the portfolio daily and prior to each issuance of ABCP or asset purchase to ensure that the Issuer will be able to repay ABCP on its maturity date. ABCP cannot be issued unless Chesham will remain in compliance with these tests. Exceeding the permitted limits may result in a termination of the programme. The following tests will be run:

- The net cumulative cash outflow (NCO) must not be greater than zero. The NCO is computed as the worst case possible net outflow from the portfolio. Every business day to the final maturity of the ABCP will be tested;

- Sensitivity to changes in interest rates; and

- Sensitivity to changes in currency exchange rates.

Moody's will monitor the results of these tests on a regular basis.

ORIGINATION AND ADMINISTRATION

BSN's principal responsibilities as Investment Advisor are to originate and structure transactions, identify securities to be financed and associated Repos or Loans to be entered into, provide day-to-day advice, on request, in relation to conduit administration and arrange and structure any necessary hedging or liquidity agreements.

The Bank of New York will act as Security Trustee, custodian and issuing and paying agent, it will also provide cash administration and act as account bank for the Issuer. The Chesham programme will be administered by QSR. While QSR is a relative newcomer to the field of the administration of ABCP conduits, QSR has experience in administering structured investment vehicles, which require close monitoring and attention to more rigorous and complex risk management and reporting requirements than traditional ABCP conduits. Moody's believes that this experience makes QSR a suitable and capable administrator for Chesham.

Moody's has recently met with BSN in London to review its capacity and abilities as sponsor and investment manager and to discuss its strategic plans for Chesham. Moody's has also met with QSR and has reviewed its conduit management systems and procedures. Moody's believes that each of BSN and QSR are capable of performing their roles in overseeing and administering the Chesham programme. Moody's has also reviewed detailed operating manuals that govern the procedures of both BSN and QSR.

Moody's ratings are subject to revision, suspension or withdrawal at any time at our absolute discretion. The ratings are expressions of opinion and not recommendations to purchase, sell or hold securities.

To obtain a copy of Moody's New Issue Report and Market Review Report in respect of this programme, please contact Moody's client service desk in London on +44-20-7772 5454 or access the website at www.moodys.com/structured finance/ABCP.

London
Annick Poulain
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.

 

© 2014 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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