Fitch af­firms Glas­ton­bury Fi­nance 2007-1

The Pak Banker - - Front Page -


Global rat­ing agency Fitch has af­firmed Glas­ton­bury Fi­nance 2007-1. The af­fir­ma­tions re­flect the notes' level of credit en­hance­ment rel­a­tive to the port­fo­lio's credit qual­ity. As­sets rated 'CCC' or be­low have re­mained sta­ble since the last sur­veil­lance re­view and ac­count for 11.9% of the port­fo­lio, while cur­rent de­faulted as­sets in the pool ac­count for GBP31.0m. CMBS as­sets rep­re­sent 80% of the port­fo­lio with whole busi­ness se­cu­ri­ti­sa­tions (WBS) mak­ing up the re­main­der. 62% of the port­fo­lio is ex­posed to the UK, fol­lowed by 28% in Ger­many, 6% in Italy and 4% in the Nether­lands.

The Neg­a­tive Out­look on the class A1 and A2 notes re­flects the port­fo­lio's in­creased obligor con­cen­tra­tion, which may ex­pose the trans­ac­tion to the idio­syn­cratic risk of de­fault of the largest oblig­ors. The largest obligor in the port­fo­lio rep­re­sents 12.9% of the no­tional and the top five as­sets ac­count for 51.3%, in­creased from 11.8% and 48.3% as of the last re­view, re­spec­tively. Fitch ex­pects the obligor con­cen­tra­tion in the port­fo­lio to in­crease as new as­sets are no longer in­tro­duced into the port­fo­lio due to the end of the rein­vest­ment pe­riod.

Fitch be­lieves a ma­te­rial risk for the trans­ac­tion is that the un­der­ly­ing struc­tured fi­nance as­sets' ma­tu­rity may ex­tend be­yond their re­ported weighted av­er­age life. The agency in­cor­po­rated this ex­ten­sion risk into its anal­y­sis of the port­fo­lio. Class A1 over-col­lat­er­al­i­sa­tion (OC) test is pass­ing, whereas OC tests for the rest of the notes are fail­ing, de­spite them im­prov­ing since the end of the rein­vest­ment pe­riod in May 2010. Ac­cord­ing to the trans­ac­tion doc­u­ments, the col­lat­eral man­ager may continue to sell de­faulted or credit-risk as­sets af­ter the rein­vest­ment pe­riod, but may no longer rein­vest any prin­ci­pal pro­ceeds. The class X notes rank se­nior to the class A1 notes, in­clud­ing also a post-en­force­ment wa­ter­fall and pay a fixed sched­uled in­stal­ment of GBP125,000 ev­ery quar­ter. As their bal­ance as of the Au­gust 2012 note pay­ment was GBP1.5m, the notes are expected to be fully re­deemed on the Au­gust 2015 note pay­ment.

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