Fitch Affirms SPICES 2005-1; Revises Outlook to Negative
Fitch Affirms SPICES 2005-1; Revises Outlook to Negative Business Wire CHICAGO -- December 18, 2012 Fitch Ratings has affirmed the rating of the notes issued by SPICES Finance Limited Series 2005-1 (SPICES 2005-1, the Issuer) and revised the Rating Outlook to Negative from Stable: --JPY5,363,000,000 notes at 'Asf'; Outlook Negative. Fitch's rating of the notes is credit-linked to the rating of the qualified investment, AT&T senior unsecured notes (ISIN US78387GAQ64, rated 'A', with a Negative Outlook). Fitch affirmed the Issuer Default Rating of AT&T Inc. and revised the Outlook to Negative from Stable on Nov. 14, 2012. Fitch monitors the performance of the underlying risk-presenting entity and adjusts the rating accordingly through application of its current credit-linked notes (CLN) criteria, 'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes', dated Feb. 22, 2012. The terms of the qualified investment allow the qualified investment issuer to exercise an early make-whole call. This exercise would cause an early termination event and could expose the SPICES 2005-1 notes to potential termination payments and currency exchange risk. However, use of this make-whole call provision remains highly unlikely, since such a call would cost the qualified investment issuer a premium of approximately 130% over current par value. Additionally, the exercise of the make-whole call provision on the qualified investment at the current premium would not result in a loss to the notes at current exchange rates. Fitch views the current probability of loss on the notes from the exercise of a make-whole call as sufficiently remote at the current rating level. SPICES 2005-1 is a credit-linked structure whereby the noteholders obtained credit exposure to the qualified investment via a cross-currency swap. Note proceeds were used to purchase a $50 million notional of the qualified investment, which serves as the collateral for the swap between the Issuer and Australia & New Zealand Banking Group (ANZ Bank), as the swap counterparty. ANZ Bank will make semi-annual interest payments in JPY to the noteholders and the Issuer will pass through the interest received on the qualified investments to ANZ Bank. At maturity, the Issuer will pass through the par amount received on the qualified investments to ANZ Bank and in return, ANZ Bank will pay the JPY equivalent using a fixed exchange rate. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. The information used to assess this rating was sourced from the originator (Morgan Stanley) and the public domain. Applicable Criteria & Related Research: --'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' (Feb. 22, 2012); --'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012). Applicable Criteria and Related Research: Counterparty Criteria for Structured Finance Transactions http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=678938 Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=672072 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. Contact: Fitch Ratings Primary Surveillance Analyst Aaron Hughes, +1-312-368-2074 Director Fitch Inc. 70 W. Madison Street Chicago, IL 60602 or Committee Chairperson Derek Miller, +1-312-368-2076 Senior Director or Media Relations: Sandro Scenga, New York, +1 212-908-0278 Email: sandro.scenga@fitchratings.com
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