TEXT - Fitch cuts notes issued by Emblem Finance Co No. 2 Ltd

Wed Jan 16, 2013 5:45pm EST

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(The following statement was released by the rating agency)
    Jan 16 - Fitch Ratings has downgraded the notes issued by Emblem Finance
Company No. 2 Limited (Emblem No.2) as follows: 

--CLP 5,082,000,000 credit-linked notes to 'BBsf' from 'BB+sf'; Outlook Stable. 

The downgrade follows Fitch's downgrade of the eligible investments to the 
transaction, HSBC Holdings Plc subordinated notes (CUSIP US404280AF65, rated 
'A+') on Dec. 7, 2012. Fitch monitors the performance of the underlying 
risk-presenting entities and adjusts the rating accordingly through application 
of its current credit-linked note (CLN) criteria, 'Global Rating Criteria for 
Single- and Multi-Name Credit-Linked Notes' dated Feb. 22, 2012. 

The rating considers the credit quality of the HSBC Holdings Plc subordinated 
notes, JPMorgan Chase & Co. as swap counterparty (rated 'A+', Outlook Stable), 
and Votorantim Participacoes S.A.'s (VPAR) current Issuer Default Rating (IDR) 
of 'BBB' with a Stable Outlook. The Rating Outlook reflects the Outlook on the 
main risk driver, VPAR, which is the lowest rated risk-presenting entity.

Emblem No. 2 is a single name CLN transaction designed to provide credit 
protection on the VPAR with a reference amount of CLP5,082,000,000 (USD10 
million). This protection is arranged through a credit default swap (CDS) 
between the issuer and the swap counterparty, JPMorgan Chase & Co. Proceeds from
the issuance of the notes were used to purchase USD10 million HSBC Holdings Plc 
subordinated notes as a collateral asset for the CDS. The notes are rated to the
payment of interest and principal per the transaction documents. All payments 
are made in USD amounts adjusted according to both the value of the Undidad de 
Fomento (UF) and the CLP/USD exchange rate as outlined in the transaction 
documents.

 (Caryn Trokie, New York Ratings Unit)
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