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18 Feb 2011
London, 18 February 2011 -- Moody's Investors Service has assigned the following ratings to notes
issued by Amathea Funding Public Limited Company:
....US$133M USD 133,000,000
Amathea Feb 2011-1 VFN Notes, Assigned Aa1 (sf)
....US$38M USD 38,000,000
Amathea Feb 2011-1 MZ Notes, Assigned A2 (sf)
....US$5M USD 5,000,000
Amathea Feb 2011-1 SN Notes, Assigned Aa1 (sf)
The ratings address the expected loss posed to investors by the legal
final maturity of the programme in October 2018.
The rated notes are ultimately backed by low loan-to-value
("LTV") loans granted to 72 funds of hedge funds (each a "Loan").
Each Loan is collateralized by all the assets (that is hedge fund shares)
of the corresponding fund of hedge funds. However, only hedge
fund shares satisfying certain eligibility criteria are used to determine
the LTV ratios. In particular, only 61% of the assets
are eligible, with the remaining 39% thus not being considered
in the LTV calculation but yet being part of the collateral securing the
Loans. In essence, the Issuer can be viewed as a CDO of 72
underlying Collateralized Fund of Hedge Funds Obligations ("CFOs").
The overall underlying portfolio comprises 486 eligible hedge funds covering
29 strategies among the 33 sectors in Moody's classification. The
strategies currently representing more than 5% are:,
Opportunistic (12.5%), CTA (11.5%),
Emerging Markets (11.4%), Long/Short Hedged (10.2%),
Macro (8.0%), Distressed (7.7%),
Event Driven (5.9%), and Fixed Income (5.8%).
Out of these 486 hedge funds, three represent more than 2%
of the eligible assets (2.34%, 2.17%,
The newly issued senior notes rank pari passu with the outstanding senior
notes and VFNs, and senior to the mezzanine notes. Unlike
the mezzanine and senior notes, the VFNs have the ability to capitalize
interest, so long as the portfolio performs. Should the capitalized
interest exceed the interest due on the underlying loans, interest
on the VFNs would be paid prior to any payments to the mezzanine notes.
This accrual mechanism has been modeled and certain interest scenarios
tested in Moody's analysis.
The principal methodology used in this rating was "Moody's Approach to
Rating Collateralized Funds of Hedge Funds Obligations" published in July
2003. In addition, Moody's publishes a weekly summary of
structured finance credit, ratings and methodologies, available
to all registered users of our website, at www.moodys.com/SFQuickCheck.
The main drivers of Moody's analysis for this transaction are as follows:
1. The covenanted maximum LTV for each of the 72 underlying Loans
ranging from 25% to 35%, combined with the additional
protection provided by the subordinated and unrated notes issued by Amathea
Funding. The current LTVs range from 0% to 31%.
2. The assumed volatility of returns of the underlying hedge funds.
For the most important strategies listed above, the volatilities
are: 62% for Emerging Markets, 50% for Opportunistic,
46% for CTA, 39% for Long/Short Hedged, 37%
for Macro, 33% for Event Driven, 30% for Distressed
and 21% for Fixed Income.
3. The assumed liquidity profile of the portfolio (i.e.
the time period over which hedge fund investments can be redeemed in cash).
According to the eligibility criteria, a hedge fund cannot be given
credit if its liquidity profile is longer than 15 months. Even
though approximately 75% of the underlying hedge funds have a liquidity
profile shorter than six months, Moody's assumed that all the hedge
funds in the portfolio have a 15 month liquidity profile.
4. The weekly check performed by Demeter (Holdings) Ltd through
a proprietary model developed jointly by Natixis and Demeter that essentially
replicates Moody's quantitative analysis. In addition, the
Loans and their covenants are monitored on a daily basis by Citco Financial
Products (London) Limited. It is noteworthy that given their relatively
subordinated position, the Amathea Feb 2011 - 1 MZ mezzanine
notes are primarily exposed to the first (few) of the 72 underlying Loans
to incur losses. This makes their rating particularly sensitive
to the portfolio parameters securing the weakest underlying VFNs.
In addition to the scenarios embedded in the published methodology referred
to above, Moody's also considered additional sensitivity tests by
stressing key inputs. By way of example, assuming a 50%
decline in value of the portfolio, and assuming both that the Issuer's
liabilities are fully drawn and that the Loans are in default, the
model output for the new debt is still investment grade.
The V Score for this transaction reflects a High uncertainty about critical
assumptions used in the analysis. This is due primarily to the
structural complexity of the transaction and its direct exposure to market
value risk. It is identical to the High V Score assigned to the
Global Hedge Fund Collateralized Fund Obligation sector. It is
however noteworthy that, compared to a typical CFO, the structure
benefits from a particularly better disclosure and quality of data provided
by the Issuer. The special report "V Scores and Parameter Sensitivities
in the Global Hedge Fund CFO Sector" is also available on moodys.com.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's bases his analysis on the investment characteristics (strategies)
chosen by the Fund of Hedge-Funds and provided by Demeter.
Moody's has carried out an operational review on some of the Fund of Hedge-Funds
and more importantly on Demeter itself. The high diversification
of both, the portfolio of Fund and Hedge-Funds but also of
the portfolio of Hedge Funds for each Fund of Hedge-Fund is an
important element considered to mitigate risks of fraud or negligence.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Please see the ratings disclosure page on our website www.moodys.com
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Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
John Paul Truijens
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
MD - Structured Finance
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
Moodys assigns ratings to Amathea Funding CFO issuance
One Canada Square
London E14 5FA
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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