相關產業分類
Fitch Ratings-Taipei/Hong Kong 30 June 2008: Fitch Ratings has affirmed the ratings on China Development Industrial Bank 2005-1 CLO Special Purpose Trust’s (SPT) beneficiary certificates, as follows:
- TWD2,838 million Class S1: ‘AA(twn)’
- TWD126m Class S2: ‘A(twn)’
- TWD176m Class M1: ‘BBB(twn)’
- TWD95m Class M2: ‘BBB-(twn)’ (BBB minus(twn))
This transaction is a static cash flow collateralised loan obligation backed by a pool of TWD denominated corporate loans originated by China Development Industrial Bank (CDIB) for the purposes of this transaction. Since closing, five reference entities have prepaid their obligations and the cash proceeds were used to partially amortise Class S1. As a result of the prepayments, the various classes of beneficiary certificates highlighted above, together with the unrated subordinated beneficiary certificates, are currently backed by a TWD4,057m portfolio of loans to 16 borrowers, reduced from TWD5.1 billion at closing.
The rating affirmation on the senior beneficiary certificates (Classes S1 and S2) and the mezzanine beneficiary certificates (Classes M1 and M2) reflects the reduction of the amounts of Class S1, which in turn increased the credit enhancement in the form of subordinated notes to 20% of total liabilities of the transaction. This credit enhancement level means that the transaction can withstand the default of five lowest rated assets out of 16 (representing 22% of the portfolio) assuming a 20% average recovery rate, or the default of four lowest rated assets (17% of the portfolio) assuming zero recovery between now and the scheduled maturity date on 10 August 2008. The affirmation also reflects the stable credit quality of the underlying collateral with the portfolio’s weighted average rating broadly unchanged at ‘B+’/‘B’ since the last review in November 2007, as well as the short maturity of all the underlying loans with a bullet principal repayment on 10 August 2008.
The ratings also reflect the existence of a liquidity reserve account and continuation of counterparties’ ratings that are consistent with Fitch’s criteria, as well as the integrity of the transaction’s legal and financial structure. The ratings address the payment of interest and the ultimate payment of principal in accordance with the transaction documentation.
Interest proceeds from the collateral are directly paid through to each certificate based on the 90-day Taiwan CP secondary market rate. There is no unmatched exposure to payment terms, currency or interest rates.
Fitch released updated criteria on April 30, 2008 for corporate CDOs and, at that time, noted it would be reviewing its ratings accordingly to establish consistency for existing and new transactions. As part of this review, Fitch makes standard adjustments for any names on RWN or Negative Outlook, reducing such ratings for default analysis purposes by two and one notch, respectively. Fitch has noted its review will be focused first on ratings most exposed to risks it has highlighted in its updated criteria. Committees are also reviewing transactions that are least impacted by the new criteria and/or portfolio migration.
Contacts: Jackie Lee, Taipei, +886 2 8175 7613; Kate Lin, Hong Kong, +852 2263 9912; David Wong, Hong Kong 2263 9927.
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