RPT-Fitch Affirms Coral's ABCP at 'F1+sf'

Fri Jul 11, 2014 7:22am EDT

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

Fitch Ratings has affirmed Coral Capital Limited/Coral Capital LLC's asset-backed commercial paper's (CP) Short-Term Rating at 'F1+sf' following a review of the programme.

KEY RATING DRIVERS

The affirmation is driven by the liquidity support provided by DZ Bank AG (DZ, A+/Stable/F1+).

The affirmation follows a discussion with DZ management and takes into consideration the conduit's performance, CP issuance, portfolio composition, administrative procedures and systems as well as credit policy over the past 12 months.

The programme contained 14 transactions as of 31 May 2014, all of which benefit from fully supported liquidity provided by DZ. The fully supported liquidity means the noteholders are not exposed to the credit risk of the transactions and liquidity can be drawn to cover CP interest and principal without deductions for defaulted assets.

TRANSACTION CHARACTERISTICS

Coral Capital Limited and Coral Capital LLC are special purpose, bankruptcy-remote corporations organised under Irish and Delaware law, respectively. The entities have been established to issue up to EUR10bn ECP and USCP in aggregate with a maximum tenor of three months. Proceeds of CP issuance are used to purchase interests in receivables and other financial assets, including leases, loans and trade receivables. Coral Capital LLC has been set into a dormant status within programme amendments implemented in December 2013.

Hence, there will be no issuance of USCP from the corporation unless it is activated again.

As of 31 May 2014, the portfolio primarily consisted of trade receivables (49% of the portfolio) and lease receivables (30%). The remainder of the portfolio was allocated to hire-purchases (15%), auto loans (2%) and some cash holdings. Total outstanding CP was EUR128m, while funded assets in the programme were about EUR725m.

RATING SENSITIVITIES

If DZ's Short-term Issuer Default Rating (ST IDR) were downgraded, Coral's CP would be downgraded. DZ is the liquidity provider, hedging agent and sponsor and Coral's CP rating is highly dependent on DZ's ST IDR.

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