LONDON, Feb. 7 /PRNewswire/ -- Standard & Poor's today assigned its
ratings to the floating-rate notes to be issued by special-purpose entity Jazz
CDO I B.V. (see list below).
The collateral backing the notes is a portfolio of investment-grade debt
securities (bonds, loans, and structured finance securities) and synthetic
assets (total return swaps and credit default swaps) managed by AXA Investment
Managers Paris S.A.
"The most unique feature of this arrangement is that the deal is the first
hybrid cash/synthetic arbitrage collateralized debt obligation (CDO) that uses
a liquidity facility," said Katrien Van Acoleyen, associate at Standard &
Poor's Structured Finance Ratings group in London.
Under the liquidity facility, the liquidity provider (Deutsche Bank AG,
London branch) agrees to make available to the issuer a revolving credit
facility, under which the issuer may draw down advances with an aggregate
principal amount equal to EUR1.7 billion.
Ms. Van Acoleyen explained further that Jazz combines elements of a cash
flow arbitrage CDO with elements of a synthetic CDO.
"The hybrid nature of the transaction means that the collateral manager
can purchase cash obligations (bonds, loans, and structured finance
securities), enter into total return swaps, and/or enter into credit default
swaps (either to buy protection or sell protection). Further, the liability
structure combines a funded and an unfunded element," she said.
"Apart from selling assets as in a traditional cash CDO, the manager can
also close out positions by entering into offsetting credit default swaps.
Furthermore, the manager is also allowed to enter into naked short
transactions by purchasing protection without having exposure," Ms. Van
Acoleyen concluded.
The preliminary ratings on the notes reflect:
-- The expected commensurate level of credit support in the form of
subordination provided by the notes junior to the respective classes;
-- The cash-flow structure, which is subject to various stresses
requested by Standard & Poor's;
-- The experience of the collateral manager;
-- The adequate ratings on the various counterparties;
-- The coverage of interest-rate and currency risk through hedge
agreements; and
-- The legal structure of the transaction, which includes the
bankruptcy-remoteness of the issuer.
A copy of Standard & Poor's complete presale report for this transaction
is available on RatingsDirect, Standard & Poor's Web-based credit analysis
system, at http://www.ratingsdirect.com. The report is also available on Standard &
Poor's Ratings Services Web site at http://www.standardandpoors.com. Under Presale
Reports, select Structured Finance, then Asset-Backed Securities.
PRELIMINARY RATINGS ASSIGNED
Jazz CDO I B.V.
EUR270 million floating-rate notes due 2011
Class Rating Amount (Mil. EUR)
A AAA 78
B AA 78
C A- 27
D BBB 27
E N.R. 60
N.R.--not rated.
SOURCE Standard & Poor's
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Related links:
http://www.standardandpoors.com/ratings
CONTACT:
Katrien van Acoleyen, London,
+44-20-7826-3860, or George H. Sun, New York, +1-212-438-6232,
both for Standard & Poor's Ratings Services
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