Bangkok--24 Nov--Moody's Asia Pacific
Moody's has assigned a provisional (P)Aa3 rating to the series 2006-1 US$15,000,000 Synthetic Portfolio Notes (the "notes") due 2014 to be issued by Onyx Funding Limited (the "issuer"), a special purpose vehicle incorporated in the Cayman Islands.
The provisional rating addresses the expected loss posed to noteholders by the legal final maturity of the notes. The scheduled maturity date of the notes is on 20 December 2014.
The provisional rating is primarily based upon:
1. the credit quality and diversification of the underlying reference portfolio;
2. the subordination provided to the notes;
3. the credit quality of the collateral;
4. the credit default swap ("CDS") entered into between the issuer and Lehman Brothers Special Financing, Inc ("LBSF") as the CDS counterparty;
5. the asset swap entered into between the issuer and LBSF as the asset swap counterparty;
6. the unconditional and irrevocable guarantee provided by Lehman Brothers Holdings Inc (A1/Prime-1) ("Lehman") to cover the payment obligations of LBSF under the CDS and the asset swap; and
7. the legal and structural integrity of the transaction.
This transaction is a synthetic CDO of sovereign and corporate entities. The issuer will sell credit protection on the reference portfolio to the CDS counterparty, LBSF. During the term of the CDS, Lion Capital Management Limited, being the replacement agent of the transaction, may propose portfolio substitutions.
All trading gains or losses as a result of the portfolio substitution may increase or decrease the subordination to the notes. Portfolio changes are allowed only if conditions to substitution are met, including passing the publicly released CDOROM model test.
The collateral consists of US$15 million Aaa-rated General Electric Capital Corporation floating rate bonds due 15 September 2014.The transaction will also incorporate rating triggers and remedies upon downgrade of the swap counterparty.
Moody's modelled this transaction using its Monte Carlo simulation model (Moody's CDOROM), which is available on Moody's website in the Structured Finance - CDO/Derivatives section. A user guide for CDOROM is also available on Moodys.com.
Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. Upon a conclusive review of the transaction and associated documentation, Moody's will endeavour to assign definitive ratings. A definitive rating (if any) may differ from a provisional rating.
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
Elaine Ng
Asst Vice President - Analyst
Structured Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121