Approximately USD 2,000m of structured securities affected
London, 11 July 2017 -- Moody's Investors Service has today placed on review for downgrade the
ratings of the senior debt programmes of Harrier Finance Funding Limited
and Harrier Finance Funding (US) LLC ("Harrier"), the issuing entities
of a structured investment vehicle called Harrier Finance Limited (a trade
name assumed by Rathgar Capital Corporation):
....US$5000M Harrier Finance Funding
(US) LLC, USD CP Program, P-1 (sf) Placed Under Review
for Possible Downgrade; previously on Oct 19, 2012 Upgraded
to P-1 (sf)
....US$5000M Harrier Finance Funding
Limited, Euro CP Program, P-1 (sf) Placed Under Review
for Possible Downgrade; previously on Oct 19, 2012 Upgraded
to P-1 (sf)
....US$5000M Harrier Finance Funding
(US) LLC, US MTN Program, P-1 (sf) Placed Under Review
for Possible Downgrade; previously on Oct 19, 2012 Upgraded
to P-1 (sf)
....US$5000M Harrier Finance Funding
(US) LLC, US MTN Program, Aa1 (sf) Placed Under Review for
Possible Downgrade; previously on Oct 19, 2012 Upgraded to
Aa1 (sf)
....US$5000M Harrier Finance Funding
Limited, Euro MTN Program, P-1 (sf) Placed Under Review
for Possible Downgrade; previously on Oct 19, 2012 Upgraded
to P-1 (sf)
....US$5000M Harrier Finance Funding
Limited, Euro MTN Program, Aa1 (sf) Placed Under Review for
Possible Downgrade; previously on Oct 19, 2012 Upgraded to
Aa1 (sf)
RATINGS RATIONALE
Harrier is a structured investment vehicle which was impacted by the global
financial crisis of 2007/2008. In 2007, the then sponsor,
WestLB, entered into a Subscription Agreement whereby WestLB would
purchase newly issued debt of Harrier to allow other debtholders to be
repaid. In 2012, the Subscription Agreement was assigned
to Erste Abwicklungsanstalt (Aa1 / P-1) ("EAA"). Given the
expectation that the repayment of the outstanding debt of Harrier would
rely on this support mechanism, the ratings of Harrier have essentially
been a pass-through of the ratings of the support provider.
In 2016, pursuant to amendments to Harrier's transaction agreements,
the maturity of notes issued by Harrier was extended to July 2022 from
July 2016. This extension, together with the current management's
recent exploration of options with regard to portfolio management through
2022, has led Moody's to review Harrier's credit outlook
and to focus on several concerns, including: (i) questions
regarding the ability of Harrier to utilize the Subscription Agreement
because of restrictions imposed by Harrier's documentation;
(ii) the availability to Harrier of the option, through Standby
Asset Purchase Agreements (SAPA) with holders of its outstanding senior
debt, to effect a repayment on outstanding senior debt by a transfer
of portfolio assets with a market value less than the par amount of outstanding
senior debt; and (iii) concerns as to the level of governance exercised
within the vehicle, including questions as to whether a number of
structural features intended to protect noteholders have been effectively
applied.
During the review Moody's will (amongst other things): (i)
seek clarifications on the mechanics of the various debt repayment options
available to Harrier; (ii) confirm the commitment of the transaction
parties to the Subscription Agreement over the SAPA; and (iii) examine
the compliance with and reporting of the vehicle's limits and tests.
Depending on Moody's conclusions with regard to the concerns outlined
above, there is a wide range of possible rating outcomes,
ranging from a confirmation of the pass-through of the Aa1 / P-1
ratings of EAA to multi-notch downgrades or a withdrawal of the
ratings.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was " Moody's Approach
to Rating Repackaged Securities" published in June 2015.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The current ratings are essentially a pass-through of the rating
of the support provider. Noteholders are exposed to the credit
risk of EAA and, setting aside the above mentioned concerns,
the ratings of Harrier are expected to move in lock-step with EAA's
rating.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the ratings
of the notes, as evidenced by 1) uncertainties of credit conditions
in the general economy, and 2) more specifically, any uncertainty
associated with the underlying credits in the transaction could have a
direct impact on the repackaged transaction.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Moody's did not use any models, or loss or cash flow analysis,
in its analysis.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
James Morton
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Ian Perrin
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
