Fitch Ratings has downgraded and placed on Negative Watch, the notes issued by Latam Trust Series 2007-105 (Latam 2007-105) as follows:
--CLP 5,136,000 credit-linked notes to 'BB+sf' from 'BBB-sf'; Rating Watch Negative.
The rating action is based on the rating of the qualified investment, Merrill Lynch & Co., Inc. subordinated notes (ISIN XS0267827169, rated 'BBB' by Fitch), as well as the rating of the reference entity, Endesa, S.A. (rated 'BBB+' on Negative Watch by Fitch). Fitch downgraded the rating of Endesa and maintained its Negative Watch status on Aug. 2, 2012. The Rating Watch Negative for Latam 2007-105 reflects Fitch's view that a downgrade to Endesa, S.A. would result in a downgrade to the notes.
Fitch's rating of Latam 2007-105 is credit-linked to the ratings of the qualified investment and the reference entity. Using the ratings of these risk-contributing factors in the transaction, Fitch applied the two-risk credit-linked note (CLN) matrix under the Fitch criteria titled 'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' dated Feb. 22, 2012 to quantify the effect on the rating of the notes.
Latam 2007-105 (the issuer) is a single-name CLN structure referencing Endesa, S.A. via a Credit Default Swap (CDS) between the issuer and the swap counterparty, Merrill Lynch Capital Services (MLCS), which is guaranteed by Merrill Lynch & Co., Inc. The CDS is funded by subordinated notes (the qualified investment) issued by Merrill Lynch & Co., Inc. The rating of the notes addresses the likelihood that investors will receive full and timely payments of interest and repayment of principal by the legal final maturity date according to the terms of the notes. Payments of interest and principal will be made in U.S. dollar (USD) amounts adjusted according to both the prevailing value of the Unidad de Fomento (UF) and the CLP/USD 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.
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:
Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=672072
Counterparty Criteria for Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=678938
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Fitch Ratings
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Aaron Hughes,
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Director
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or
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Derek
Miller, +1-312-368-2076
Senior Director
or
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Sandro
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sandro.scenga@fitchratings.com