2009-11-20 23:40:02 -
Fitch Ratings was notified of the intention to change the interest rate swap and basis swap counterparty (Novation) of Commodore CDO III Ltd./Inc (Commodore III) to Barclays Bank PLC (Barclays, rated 'AA-/F1+' with a Stable Rating Outlook by Fitch), from AIG Financial Products Corp (AIG FP, rated 'BBB/F1' with an Evolving Outlook).
In reviewing the Novation documents, Fitch applied its current
counterparty criteria 'Counterparty Criteria for Structured Finance Transactions', dated Oct. 22, 2009. Under the criteria, the minimum counterparty rating for notes rated 'AA-' or better are 'A/F1', and therefore Barclays' current rating meets this requirement.
Fitch also reviewed the collateral posting requirements as specified in the Credit Support Annex (CSA) between Barclays and Commodore III.
Similar to the CSA between AIG FP and Commodore III, the remedial period is specified to be no longer than thirty days upon the counterparty's downgrade below a certain threshold. This remedial period is longer than Fitch's expectation that such action be effected within fourteen days.
However, given the current ratings on the notes of Commodore III and out-of-the money strike rates on the interest rate hedges involved, Fitch believes that this deviation from its current counterparty criteria has an immaterial impact on the ratings of Commodore III.
In summary, Fitch does not believe that the Novation will impact the ratings on Commodore III.
This commentary does not address whether or not the Novation is permitted by the terms of the Commodore III documents. Nor does it address whether the counterparty change is in the best interests of, or prejudicial to, some or all of the holders of Commodore III.
Fitch emphasizes that while the new counterparty's rating satisfies Fitch's counterparty criteria within the context of Commodore III at the time of this review, if the counterparty becomes ineligible in the future under Fitch's criteria effective at that time, Fitch expects that the issuer inform it of the intended course of action, regardless of the provisions in the transaction documentation.
This review was conducted under the framework of Fitch's current counterparty criteria available at ' www.fitchratings.com :
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--'Counterparty Criteria for Structured Finance Transactions', dated Oct. 22, 2009.
Additional information is available at ' www.fitchratings.com :
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Fitch RatingsAlina Pak, 312-368-3184, ChicagoKevin Kendra,
212-908-0760, New YorkorMedia Relations:Sandro Scenga,
212-908-0278, New YorkEmail:
sandro.scenga@fitchratings.com : mailto:sandro.scenga@fitchratings.com
