Fitch Ratings has affirmed the notes issued by Signum Finance Cayman Limited series 2010-09 (Signum 2010-09):
--$200,000,000 secured variable-rate notes at 'Asf'; Outlook Stable.
The affirmation is based on the performance of the insurance pool referenced under the swap agreement and the rating of Goldman Sachs Group Inc. (rated 'A' with a Stable Outlook by Fitch) as the highest risk-presenting factor in Signum 2010-09. Fitch's credit analysis of the notes is credit-linked to the ratings of Goldman Sachs Group Inc., as guarantor to Goldman Sachs International (GSI), the swap counterparty and backup collateral assets settlement provider (CASP), as well as the excess-mortality experience of the defined insurance block. The swap counterparty guarantor and the collateral assets issuer are the same, and are therefore treated as one risk-presenting factor. Using the ratings of these risk-contributing factors in the transaction, Fitch applied the two-risk CLN matrix under its criteria for single- and multi-name credit-linked notes (referenced below at the end of this press release) to quantify the effect on the rating of the notes.
Goldman Sachs Group Inc., as guarantor of GSI, is considered the highest risk-presenting factor in this transaction. The highest risk-presenting factor is considered the 'weakest link', as it contributes the most risk to the transaction in terms of probability of default. The 'additional risk' from the second risk-presenting factor comes from the mortality experience of a defined block of level-term life insurance policies under the excess mortality swap agreement. The cumulative actual-to-expected mortality experience has slightly exceeded 100% but is significantly below specified trigger levels and remains within range of the modeling expectations of 'AA' as of the surveillance report dated May 31, 2012.
The issuer is a bankruptcy-remote, special purpose vehicle (SPV) established to issue the notes, the proceeds of which are used to purchase collateral assets in the form of 15-year senior unsecured bonds issued by Goldman Sachs Group Inc. The issuer also entered into a 15-year swap with GSI as the swap counterparty. Under the mortality swap, the SPV will provide mortality protection on a defined block of U.S. level-term life insurance policies. The SPV will make payments to GSI in the event actual mortality experience of the defined block exceeds specified trigger levels, while the fixed payments from GSI to the SPV will be paid to investors in the notes. An agreement with the CASP provides for a return of par value to the issuer in exchange for a principal amount of the collateral assets equivalent to the payment due from the issuer to the noteholder in the event of an early redemption due to a cancellation event under the mortality swap, or from the issuer to the swap counterparty following a loss. GSI serves as the Backup CASP, providing for the full payment of par value should the CASP default in its obligations under the agreement.
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 reinsurer reports and the public domain.
Applicable Criteria & Related Research:
--'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' (Feb. 22, 2012);
--'Insurance-Linked Securities' (Aug. 11, 2011);
--'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012).
Applicable Criteria and Related Research:
Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes
Insurance-Linked Securities 2009: Year in Review
Counterparty Criteria for Structured Finance Transactions
Primary Surveillance Analyst (Structured Credit)
Aaron Hughes, +1-312-368-2074
70 West Madison Street
Chicago, IL 60602
Secondary Analyst (Insurance)
Jeff Mohrenweiser, +1-312-368-3182
Derek Miller, +1-312-368-2076
Brian Bertsch, +1-212-908-0549