Moody's Upgrades the Ratings of Brazilian Future Flow Transactions Backed by Diversified Payment Rights
New York, October 23, 2007 -- Moody's Investors Service has upgraded the long-term foreign-currency
ratings of certain Brazilian future flow transactions backed by diversified
payment rights (DPRs). This upgrade concludes Moody's review
that initiated on June 6th, 2007.
The upgrades are the result of the higher local currency ratings of certain
Brazilian banks, Moody's review of the risk of sovereign interference
in future flow transactions, as well as the historical performance
of the transactions and the structural protections in place.
The global local currency ratings of five of the Brazilian banks that
originate the flows backing the transactions or are now higher than they
were when the transactions were originally rated. The global local
currency deposit ratings of Banco Itau, Banco Bradesco, Banco
do Brasil, Unibanco, and HSBC Bank Brasil are currently A1
and the global local currency deposit rating of Banco Santander is now
A3 (positive outlook).
In addition, the ratings of future flow deals traditionally incorporated
the risk of sovereign interference, which was the risk that the
government would divert the assigned cash flows that back repayment of
the notes away from the trust collection account. Although this
risk was traditionally viewed as being mitigated, it was not completely
removed from the transactions. However, Moody's view
on sovereign interference for future flow transactions that involve financial
assets (credit card vouchers and diversified payment rights) has evolved
over time. Currently, Moody's views the risk of sovereign
interference in financial future flow securitizations as significantly
lower than previously estimated. As a result, in Moody's
view, financial future flow securitizations could be rated as high
as the local currency rating of the originator of the flows if the level
and volatility of cash flows together with the legal structure support
the higher rating.
Moody's also notes that all of the transactions upgraded have shown
solid performance since the respective inception of each program and cash
flows as well as debt service coverage ratios are high. The transactions
also incorporate structural mechanisms to protect against the issuance
of new debt and overleveraging of the programs.
The following ratings have been upgraded:
Brazilian Diversified Payment Rights Finance Company
o Series 2003-3 notes, to A1 from Baa1
o Series 2004-1 notes, to A1 from Baa1
o Series 2005-2 notes, to A1 from Baa1
o Series 2006-1 notes to A1 from Baa1
International Diversified Payment Rights Company
o Series 2003-1 notes, to A1 from Baa1
o Series 2007-2 notes, to A1 from Baa1
Dollar Diversified Payment Rights Finance Company
o Series 2001-1 notes, to A1 from Baa1
o Series 2002-2 notes, to A1 from Baa1
o Series 2003-1 notes, to A1 from Baa1
o Series 2003-2 notes, to A1 from Baa1
UBB Diversified Payment Rights Finance Company
o Series 2002-1 notes (Amended and Restated as of January 17th,
2006), to A1 from Baa1
o Series 2003-2 notes, to A1 from Baa1
o Series 2003-3 notes, to A1 from Baa1
o Series 2004-2 notes (Amended and Restated as of July 17th,
2006), to A1 from Baa1
Brazil Foreign Diversified Payment Rights Finance Company
o Series 2004-1 notes, to A3 from Baa1
Moody's notes that the Aaa ratings assigned to certain series of notes
issued by these programs are not affected, because those ratings
are based on financial guaranty policies issued by Aaa-rated financial
guaranty providers. However, the shadow ratings of these
transactions (assessment of the risk that the transaction represents for
the financial insurer on a stand alone basis without taking into consideration
any outside credit enhancement) have been changed as follows:
Brazilian Diversified Payment Rights Finance Company
o Series 2005-1 notes, shadow rating upgrade to A1 from Baa1
International Diversified Payment Rights Company
o Series 2004-1 notes, shadow rating upgrade to A1 from Baa1
o Series 2007-1 notes, shadow rating upgrade to A1 from Baa1
Dollar Diversified Payment Rights Finance Company
o Series 2002-1 notes, shadow rating upgrade to A1 from Baa1
UBB Diversified Payment Rights Finance Company
o Series 2005-1 notes, shadow rating upgrade to A1 from Baa1
HSBC Brazil DPR Finance (No.1) Ltd
o Series 2006-A notes, shadow rating upgrade to A1 from Baa1
New York
Susan Knapp
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Victoria Moreno
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653