Bangkok--14 Nov--Moody's Asia Pacific
Hong Kong, November 14, 2006 -- Moody's assigned provisional ratings of (P)Aa3 to the Class A notes, (P)A3 to the Class B notes and (P)B2 to the Class C notes issued by ARLO IV Limited. The transaction is a synthetic CDO of 60 Euro and foreign currency convertible bonds issued by corporations domiciled in India. The transaction enables Barclays Bank
Plc to buy protection on the underlying portfolio, the size of which is estimated at USD300 million. This is the first transaction rated by Moody's in which the portfolio is wholly concentrated in obligations issued by Indian corporations.
The complete rating action is as follow:
Issuer: ARLO IV Limited
US$[174
] million Class A Secured Limited Recourse Credit Linked Managed
Notes due 2011, rated (P)Aa3;
US$[60
] million Class B Secured Limited Recourse Credit Linked Managed
Notes due 2011, rated (P)A3; and
US$[30
] million Class C Secured Limited Recourse Credit Linked Managed
Notes due 2011, rated (P)B2.
The provisional ratings are assigned based on information of the portfolio
of reference entities, the expected structure and credit tranching as of
13 November 2006. The final ratings are subject to finalization of the
portfolio and the structure.
The provisional ratings are based primarily on the following:
-- The credit quality of the reference pool;
-- The credit enhancement available to each class of notes;
-- The governing ISDA documentation (particularly the defined Credit
Events);
-- The swap counterparty and arrangements regarding the issuance
proceeds; and
-- The structure of the transaction including the replenishment conditions.
On closing date, Barclays as the swap counterparty, will enter into a CDS
with the issuer, ARLO IV Limited, related to a portfolio of 60 euro and
foreign currency convertible bonds (reference portfolio) from
corporations either domiciled in India or where the majority of their
businesses is in India. The issuer will pay all proceeds amounts to
Barclays to be invested in eligible collateral under a credit support
annex (CSA) executed at closing. In addition to the proceeds amounts,
expenses and one quarter of interest payments will also be posted under
the CSA. If Barclays' rating is downgraded to Baa1 or lower, then the
amount of interest to be posted under the CSA will increase to two
periods of interest payments.
Most of the reference entities in this portfolio are not publicly rated by Moody's, therefore, Moody's used a quantitative mapping approach, and a qualitative review of ICICI's internal rating process to give credit to those non-rated reference entities. Using the mapping approach, Moody's determined the credit quality of the initial portfolio is consistent with
a Ba3 rating.
Interest on the notes will be paid quarterly, while principal repayments on the notes can occur prior to the scheduled maturity date if any of the underlying credits were called and no replacement was found within three months. The portfolio manager is ST Asset Management Ltd and the portfolio advisor is ICICI Bank Limited (Singapore Branch). Any replacement will have to pass certain conditions including passing the Moody's CDOROM Manage-to-Model test.
A more detailed analysis of the transaction is available at Moody's web site in the Pre-sale Reports section: http://www.moodys.com Moody's Investors Service is a publisher of rating opinions and research. It is not involved in the offering or sale of any securities, nor is it acting on behalf of the offering party. This release is not a solicitation or a recommendation to buy, hold or sell securities.
Hong Kong
Min Ye
Managing Director
Structured Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121
Hong Kong
Myrna Fajardo
VP - Senior Credit Officer
Structured Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121