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Global Credit Research - 21 Apr 2011
USD 2,036 million of debt securities affected
Paris, April 21, 2011 -- Moody's has reviewed the above Trafigura Securitisation Finance
plc transaction in conjunction with various amendments (the Amendments)
to the transaction documents effected in April 2011. Moody's has taken no action
on the rating of the Class A and B notes as well as on the Senior and
Junior Variable Funding Notes (VFN) as a result of the review.
A detailed list of the ratings are available at the end of this press
release. The maximum issuance amount of the VFN is 1,606.5
Trafigura Securitisation Finance plc is a securitisation of trade receivables
originated by the Trafigura group which has revolved since its closing
date in May 2004. The securitised trade receivables are generated
from the sale of oil products, metal concentrates, iron ore
and coal. The portfolio performances have been in line with expectations
since the rating was assigned in 2007, showing very limited delinquency
and dilution rates (both were lower than 0.2% of the portfolio
outstanding balance since closing).
The amendments will have the effect, among other things, of
extending the transaction legal final maturity, extending the revolving
period by 5 years, allowing for the purchase of receivables from
customers in two additional industrial sectors (Iron Ore and Coal),
adding a Senior and Junior VFN Noteholder and reducing the credit enhancement
to previous levels as of closing date. Additional details on Moody's
review of the transaction are stated below.
The Notes are backed by a pool of receivables extended to Trafigura's
customers. As Trafigura's banks provide letters of credit
(Documentary credit) on part of Trafigura's customers, the
portfolio credit risk is not only on the receivable end debtor but also
on Trafigura's banks. As of March 2011, the banking
industry accounted for 68% of the pool while 28% were exposures
to oil companies and 3% to the metals and mining industry industries.
The portfolio includes on average a total of 50 debtors and can bear large
exposure to a single borrower up to the concentration limits linked to
single debtors rating.
At the same time, the contractual term of the receivables is very
short and in practice has been no more than one month.
Moody's modelled the portfolio credit risk using CDOROM under various
portfolio composition scenario given the debtor concentration limits.
The CDOROM correlation framework reflects the short term and industrial
concentration specificities of such portfolio. Moody's analysed
historical defaults and rating migrations in the banking, oil,
metal, and coal industries. The CDOROM industrial sector
overconcentration correlation stress was removed while the industries
correlation assumptions were increased as follow: Banking:
27% vs 12%, Oil and gas: 17% vs 12%,
Metals and Mining: 27% vs 12%. Further,
Moody's assumed a default probability equivalent to B1 for the non
The various portfolio composition scenario were modelled given the minimum
updated credit enhancement of 15% for the Class A Notes and Senior
VFN and 9% for the Class B and Junior VFN (down from 17%
and 11% respectively), but at the same levels as of transaction
closing date which were part of this amendment.
Overall, the transaction amendments were assessed under the revised
correlation and default probability assumptions. The various portfolio
scenario were build to anticipate possible portfolio modifications during
the extended revolving period.
In addition to its quantitative analysis, Moody's reassessed
the transaction structural features and the operational risks.
The Aaa (sf) rating of the series of the Class A Notes and the Senior
VFNs and the Baa2 (sf) rating of the Class B Notes and the Junior VFNs
take into consideration the following structural features:
- The credit protection, which consists of over-collateralization
provided by a floor of 15% for the Senior Notes and 9% for
the Junior Notes, together with a floating level of subordination,
based on a dynamic formula and including multiples of past dilution and
- The debtors concentration limits, including a minimum of
30% of debtors rated at least A3 and a maximum of 30% of
debtors being non-rated or non-investment grade debtors.
- Early amortisation triggers linked to a deterioration of the
performance of the receivables.
In addition to the above structural features, the transaction ratings
are based on the following operational risk mitigants:
- Société Générale (Aa2/P-1)
has been appointed since closing in 2004 as back-up servicer in
the transaction. Moody's thinks that Société
Générale would be able to step in rapidly as back-up
servicer if needed as it receives daily receivables reporting.
-A cash reserve is available as a liquidity source to cover senior
fees and coupons for a period of 13 weeks. Société
Générale also acts as cash manager for Trafigura Securitisation
- The transaction is subject to early amortisation triggers linked
to a deterioration of the credit quality of Trafigura.
- The obligors are directed to pay their invoice balances to one
collection account that is held in the name of the Issuer with Deutsche
Bank (Aa3/P-1) which mitigates the commingling credit risk.
Trafigura is one of the world's largest independent commodities traders.
Trafigura Beheer B.V., which was established in 1993,
is registered in Amsterdam, The Netherlands, and trades through
its Swiss branches in Geneva and Lucerne. It has a network of 67
offices in over 44 countries, with major locations in, Geneva,
Stamford, Houston, Singapore and London.
The ratings address the expected loss posed to investors by the legal
final maturity of the notes. In Moody's opinion, the structure
allows for timely payment of interest and ultimate payment of principal
with respect to the Notes by the legal final maturity.
The principal methodologies used in this rating were "Refining the ABS
SME Approach: Moody's Probability of Default Assumptions In The
Rating Analysis of Granular Small and Mid-sized Enterprise portfolios
in EMEA" published in March 2009, "Moody's Approach to Rating Granular
SME Transactions in Europe, Middle East and Africa" published in
June 2007, "Moody's Approach to Rating Trade Receivables Backed
Transactions", published in July 2002 and "Global Structured Finance
Operational Risk Guidelines: Moody's Approach to Analyzing Performance
Disruption Risk" methodology published on March 2011.
Detailed list of notes ratings affirmed:
- Aaa (sf) to the USD 400 million Class A Asset-Backed Floating-Rate
Notes due 2012; and
- Aaa (sf) to the USD 1,495 million Senior Variable Funding
- Baa2 (sf) to the USD 30 million Class B Asset-Backed Floating-Rate
Notes due 2012.
- Baa2 (sf) to the USD 111.5 million Junior Variable Funding
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Moody's France SAS
Moody's affirms ratings of Trafigura Securitisation Finance Plc, trade receivables ABS, following deal amendment
96 Boulevard Haussmann
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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