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11 Feb 2008
Moody's comments on Australian ABCP in light of mortgage insurance company rating actions; varied sensitivity, no immediate ratings impact
Sydney, February 11, 2008 -- Moody's has today commented on the ratings assigned to Australian
and New Zealand asset-backed commercial paper (ABCP) conduits.
This follows the placement on review for possible downgrade of PMI Mortgage
Insurance Ltd (PMI) (IFSR Aa2), a major provider of credit enhancement
to the Australian residential mortgage market, including a large
number of warehousing facilities funded through ABCP.
No immediate rating action has been taken. In Moody's opinion
a moderate downgrade of PMI will not, in and of itself, affect
the ratings assigned to Australian ABCP conduits, subject to the
provisos set out below.
Moody's considers the exact impact of any PMI downgrade, should
it occur, would vary on a conduit-by-conduit basis,
depending on a number of factors, including the proportion of PMI-insured
mortgage loans funded through the conduit, its exact structural
features, presence of program-wide credit enhancement and,
in some cases, the sponsor's willingness to address any residual
Based on these factors, Moody's has identified three groups of Australian and NZ ABCP conduits: (1) those whose ratings are essentially de-linked from any rating actions taken with regard to PMI; (2) those whose
ratings can be expected to withstand at least a four-to-five notch downgrade of PMI but may be negatively affected in the event of a more severe rating action; and (3) those whose ratings will come under some pressure in the event of a downgrade, including a minor downgrade. In this latter case Moody's has given some benefit to the willingness of the applicable sponsors to restructure or otherwise enhance the conduit so as to retain its current rating.
Specifically, the three groups are as follows:
- ABCP conduits de-linked from PMI. In the majority
of cases, these are conduits that either do not fund mortgage-insured
residential loans, fund a de minimus proportion of such, or
rely on significant program-wide credit enhancement, sufficient
to protect the conduit from any mortgage insurer downgrade in full.
- Liberty CP Trust 2002-1, rated P-1;
- Liberty CP Trust 2007-1, rated P-1;
- Liberty Sirius Trust, rated (P)P-1;
- MTF Securities Ltd, rated P-1;
- Mustang No.1 Trust, rated P-1;
- Sydney Capital Corporation Inc , rated P-1;
- Waratah Securities Australia Ltd, rated P-1;
- Waratah Securities Australia Ltd (NZ Series), rated P-1;
- Colonial First State Wholesale Geared Share Fund, rated
- ABCP conduits whose ratings are likely to withstand at least a four-to-five notch downgrade of PMI.
These are multi-seller conduits funding a moderate proportion of PMI-insured loans.
- George Street Finance Pty Limited/George Street Finance LLC,
- Tasman Funding Inc & Abel Funding Pty Ltd, rated P-1;
- Titan Securitisation Ltd &TSL (USA) Inc, rated P-1;
- Coast Asset Corporation, rated P-1;
- Asset Collateralized Entity Ltd (Series 2), rated P-1;
- Home Owner Mortgage Enhanced Securities Ltd, Series I,
- Austra Corporation, rated P-1.
- ABCP conduits whose ratings may exhibit some downward pressure
following a downgrade of PMI. These are conduits retaining significant
exposure to PMI and characterised by insufficient or a lack of program-wide
credit enhancement. We note that in choosing not to immediately
place these ABCP conduits on review, Moody's has relied on
the willingness indicated by the applicable sponsor banks to restructure
the conduits or to provide additional credit enhancement in the event
of a PMI downgrade. Moody's continues to discuss the likely
impact of any such downgrade and the available avenues of redress with
the sponsors and is closely monitoring any developments in this regard.
- CUTLASS Securitisation Ltd, rated P-1;
- SCIMITAR Securitisation Limited, rated P-1;
- SPEAR Securitisation Limited, rated P-1;
- Spinnaker Capital Pty Limited/Keel Capital Inc, rated P-1.
Moody's continues to monitor the situation surrounding the ratings
review of mortgage insurance companies, including PMI. We
expect to provide a further update of the impact any related ratings action
may have on the Australian and New Zealand ABCP markets upon any further
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Structured Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
No Related Data.
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