RPT-Fitch rates Corsair Finance (Ireland) No.6 Limited Series 24 notes

Thu Jul 11, 2013 7:59am EDT

July 11 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Corsair Finance (Ireland) No.6 Limited's notes final ratings as follows:

Series 24 EUR40m Notes Linked to Italian Inflation-Linked Government Bonds due 2023 (ISIN XS0868104414): 'BBB-sf', Outlook Negative

KEY RATING DRIVERS

The rating addresses the timely payment of interest on the notes according to the terms and conditions of the documentation, as well as the repayment of principal by legal final maturity in September 2023. The rating reflects the credit quality of three risk-presenting entities, as well as the legal and financial structure of the issuer. The three risk presenting entities are Italy ('BBB+'/Negative/'F2'), JPMorgan Chase Bank, N.A. ('A+'/Stable/'F1') and The Bank of New York Mellon SA/NV ('AA-'/Stable/'F1+').

The notes' Negative Outlook reflects that on Italy's ratings.

At closing, which occurred on 21 December 2012, the proceeds from the note issuance were used to purchase an Italian government inflation linked bond (ISIN IT0004243512) and to enter into an asset swap with J.P. Morgan Securities plc (unrated by Fitch). Then on 4 July 2013 JPMorgan Chase Bank, N.A. ('A+'/Stable/'F1') replaced its affiliate J.P. Morgan Securities plc as counterparty under the asset swap. The Italian government bond is held in custody by The Bank of New York Mellon SA/NV ('AA-'/Stable/'F1+'). The swap counterparty claims rank senior to noteholders in all circumstances. The asset swap pays an annual fixed 3.93% coupon in return for the interest receipts on the inflation linked bonds, the coupon of which is 2.6% multiplied by eurozone CPI and paid semi-annually. The noteholders have exercised the option to decrease the fixed coupon rate (from an initial 5.60%) in return for an additional lump-sum payment of EUR6m that was made on 16 May 2013. The notes are secured by the inflation linked bonds and any collateral posting by the issuer under the swap takes the form of the inflation linked bonds and is capped at their notional.

Fitch notes that Italy's government cannot prepay its bonds via a call option which would trigger a mandatory redemption event. The only way the government can prepay its bonds is through buying the bonds back in the open market.

The notes are issued by Corsair Finance (Ireland) No.6 Limited (the issuer), a company which was incorporated under Irish law and with limited liability with the purpose of establishing a programme arranged by J.P. Morgan Securities plc for the issuance of notes. Non-petition language included in the master programme warrant that no party to any series will be able to petition for the winding-up of the issuer as a consequence of the default of any particular series. In addition, limited recourse clauses in the programme restrict the noteholder of a given series to only have recourse to the collateral assigned to this series.

RATING SENSITIVITIES

Fitch considered the downgrade of each of the three risk presenting entities. The transaction is most sensitive to a downgrade of the Republic of Italy, being the lowest rated of the three risk presenting entities. A one notch downgrade is likely to cause a downgrade of the note. In addition, an up to three notch downgrade of JPMorgan Chase Bank, N.A. is unlikely to cause a downgrade of the note. Finally a one notch downgrade of The Bank of New York Mellon SA/NV is likely to result in a downgrade of the notes.

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