MOODY'S RATES TAIWAN'S COSMOS BANK'S CASH CARD SECURITIZATION DEAL (P)Aa3
Hong Kong, November 19, 2003 -- Moody's Investors Service has assigned a provisional (P)Aa3 rating to the secured floating rate notes (the notes) to be issued by G & M Finance Limited. The transaction is the first cross-border asset-backed securitization transaction arranged under Taiwan's Financial Asset Securitization Law passed in June 2002. It is also the first securitization transaction for Cosmos Bank, Taiwan. UBS Limited and HVB Singapore Limited brought the deal to the market. The complete rating action is as follows:
Issuer: G & M Finance Limited
US$[230,000,000] Secured Floating Rate Notes due , rated (P)Aa3
The (P)Aa3 rating on the notes addresses the timely payments of interest and the ultimate repayment of principal at par by the note maturity date in [January 2010].
In assigning the (P)Aa3 rating, Moody's mainly considered the following factors:
1. the credit quality of the underlying George & Mary cash card receivables (GM cash card receivables);
2. the % subordination to be provided by the subordinated seller interest;
3. the fully-funded reserve to cover (a)  months of senior fees and expenses, and yield on the investor interest, (b) costs related to sending out servicer termination notices, and (c) transference expenses incurred in the event that the servicer's role has to be transferred to the back-up servicer;
4. the NTD/USD currency and interest rate swap to be provided by UBS AG - acting through its Taipei branch - as the swap counterparty (UBS Taipei branch);
5. the transaction's structural features, including the various triggers that are involved in servicer termination events and accelerated amortization events;
6. the approval to be obtained from the Bureau of Monetary Affairs department of the Taiwan Ministry of Finance on the issuance of trust certificates by the receivables trust;
7. the perfection of the transfer of existing and future GM cash card receivables against all parties, including the relevant obligors, by publication prior to the transfer date;
8. the experience of Cosmos Bank, Taiwan (Cosmos) as the originator and the servicer; and
9. the involvement of Deutsche Bank AG, Taipei branch (DB Taipei branch) as both the receivables trustee and back-up servicer.
G & M Finance Limited (the issuer), will use the proceeds of the notes to subscribe for the investor interest to be issued by the Cosmos Bank George & Mary Cash Card 2003 Securitisation Special Purpose Trust (the receivables trust), which has been established under Taiwanese law.
The receivables trust will create the investor interest, the subordinated seller interest, the seller interest and the ESR interest. Cosmos will subscribe for the subordinated seller interest and the seller interest. The ESR interest will be placed in Taiwan.
Cosmos will transfer a pool of GM cash card receivables to the receivables trust. Collections from these receivables will be used to fulfill various payment obligations. A seller interest of % will be present to absorb fluctuations in the receivables balance.
The structure features a 6-month revolving period and a 5.5-year amortization period. The notes will pay monthly interest at the rate of one-month LIBOR plus a spread. The principal will be repaid on a pass-through basis during the amortization period.
Upon hitting the accelerated amortization triggers, the revolving or amortization periods will end immediately. The investor percentage - used to determine the portion of collections which the investor interest will receive - will be fixed at that time, causing more principal collections to be passed through to the investor interest than during the amortization period.
A swap to be provided by UBS Taipei branch will be in place to mitigate the currency and interest rate mismatches.
In rating the transaction, Moody's considered, among other factors, the historical performance of the GM cash card receivables, and the structural protections built into the transaction.
From its analysis, Moody's believes that the % subordination to be provided by the subordinated seller interest will offer sufficient protection to noteholders against potential defaults in the underlying GM cash card receivables and that it is consistent with the (P)Aa3 rating.
A more detailed analysis of the transaction will soon be available at Moody's website in the Pre-Sale Reports section: http://www.moodys.com
The issuer is a newly established bankruptcy-remote, special purpose company incorporated in the Cayman Islands. Cosmos is the originator and servicer of the GM cash card receivables. Cosmos introduced the George & Mary cash card in Taiwan in July 1999 and currently has the largest domestic market share, about 55% in terms of the total outstanding balance, of the cash card business in Taiwan. DB Taipei branch is the receivables trustee and the back-up servicer.
The securities will not be registered under the Securities Act of 1933 (the Act) under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance will be designed to permit resale under Rule 144A.
The provisional rating is issued in advance of the final issue of the notes and reflects Moody's preliminary credit opinions regarding the transaction only. Moody's makes no representations that the provisional rating will be the same as the final rating. The definitive rating of the transaction is subject to the satisfactory review of the final structure, documents and legal opinions, which have to be provided to Moody's within 30 days.
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