RPT-Fitch Affirm Eirles Two Series 364; Outlook Revised to Negative

Mon May 26, 2014 3:22am EDT

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May 26 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Eirles Two Limited Series 364's accreting zero coupon secured notes and revised its Outlook as follows:

USD100m accreting zero coupon secured notes due May 2043 affirmed at 'A+sf'; Outlook revised to Negative from Stable

KEY RATING DRIVERS

The rating addresses the repayment of the accreted principal on the notes according to the terms and conditions of the documentation. The rating reflects the credit quality of two risk-presenting entities as well as the issuer's legal and financial structure. The two risk-presenting entities are Deutsche Bank, AG, London Branch (DB; A+/Negative/F1+) and France (AA+/Stable/F1+). The Negative Outlook of the notes addresses the Negative Outlook on DB.

RATING SENSITIVITIES

The rating on the notes is driven by that of the lowest-rated risk entity in this transaction, DB. As a result, a rating downgrade of up to two notches to France will not affect the 'A+sf' of the notes. Should the rating of DB be downgraded or upgraded by one notch, with all else being equal, the notes' rating would be downgraded or upgraded correspondingly.

The issued notes bear no interest. However, their principal notional will accrete at an annual rate of 7% in the first year, 2.35% in the second year and 4.65% in the subsequent years till 2043. The issuer pays the swap counterparty all interest and principal received on the collaterals and the swap counterparty will pay the accreted principal amount due to the noteholders at redemption.

According to the transaction documents, on the first business day after the issue date, the issuer exchanged the original collateral with DB to receive eligible collateral with a principal amount that is greater or equal to the principal amount of the notes of USD100m. The collateral after the exchange is a cash deposit of USD 105.3m, held with the deposit bank, Deutsche Bank Trust Company Americas (DBTCA, A+/Negative/F1+) in a segregated account. Fitch considers the default risk of DB and DBTCA to be highly correlated and therefore views DB and DBTCA as one risk-presenting entity in the transaction.

The notes are issued by Eirles Two Limited, under a secured note programme arranged by DB, incorporated with limited liability under Irish law.