Fitch Ratings was notified of the intention to change the interest rate swap, interest rate cap, and senior swap counterparty (Novation Transactions) of two structured finance collateralized debt obligation (CDO) transactions to Inter Europe Counseil (IEC), subsidiary of Societe Generale (SG), from Societe Generale, through its Paris Head Office (SGP). The new obligations of IEC under the agreements are guaranteed by SG, rated 'A+/F1+' with a Stable Outlook by Fitch. Fitch does not believe that the novations will impact the ratings on any of the notes.
The affected transactions are listed below:
--Duke Funding IX, Ltd.
--South Coast Funding I, Ltd.
In reviewing the draft novation documents, Fitch applied its current counterparty criteria 'Counterparty Criteria for Structured Finance Transactions', dated Oct. 22, 2009. The core criteria expects counterparties to have a minimum Fitch long-term IDR of 'BBB+' and a minimum short-term IDR of 'F2' for transactions where the highest note rating does not exceed 'A+'. SG's current Fitch long-term and short-term IDR exceed these requirements.
This commentary does not address whether or not the novations are permitted by the terms of the respective transaction 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 each of the transactions.
Fitch emphasizes that while the new counterparty generally satisfies Fitch's counterparty criteria within the context of the affected transactions at the time of this review, if the counterparty becomes ineligible in the future under Fitch's criteria effective at that time, Fitch expects the issuer to inform Fitch of the intended course of action, regardless of the provisions in the transaction documentation.
Additional information is available at 'www.fitchratings.com'.
The source of information used to assess these swap counterparty changes was the replacement swap counterparty, Societe Generale.
Applicable Criteria and Related Research:
'Counterparty Criteria for Structured Finance Transactions' (Oct. 22, 2009);
'Global Structured Finance Rating Criteria' (Aug. 16, 2010).
Applicable Criteria and Related Research:
Counterparty Criteria for Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=475588
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326
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