Emirates NBD
EMIRATESNBD
EMIRATESNBD
Moody's Investors Service has today confirmed the ratings of Emirates NBD Auto Finance Limited, a securitisation of auto loans to obligors in the UAE, and Emirates NBD Auto Financing Limited, a repack of the former transaction, according to the official website of Moody's Ratings.
The rating of the series APC notes in Emirates NBD Auto Finance Limited (the underlying transaction) incorporates a strong level of credit linkage to Emirates NBD PJSC ( Emirates; Baa1/P-2) as the swap counterparty for a balance guaranteed swap that converts the UAE Dirham proceeds into Japanese yen in order to pay the amounts due under the notes.
Today's rating action concludes the review of the rating on the series APC notes in the underlying transaction, which Moody's placed on review on 14 November 2013. The review focused on the swap counterparty exposure following Moody's introduction of the rating agency's updated approach to assessing swap counterparties in structured finance cash flow transactions ("Approach to Assessing Swap Counterparties in Structured Finance Cash Flow Transactions", published on 12 November 2013: https://www.moodys.com/research/Approach-to-Assessing-Swap-Counterparties-in-Structured-Finance-Cash-Flow--PBS_SF344857).
As part of its review of the underlying transaction, Moody's has incorporated the risk of additional losses on the notes, in case the notes become unhedged following a swap counterparty default. Assets backing the notes in this deal are fixed-rate assets denominated in UAE Dirham, while the notes are referenced to Yen Libor. The transaction includes a swap agreement with Emirates to hedge the currency risk. Net swap payments in recent periods were in favour of the swap counterparty; given the current interest-rate environment however, future net swap payments could be in favour of the issuer.
Moody's understands that the swap is currently out of the money for the issuer. However, due its Baa1 rating, Emirates is posting collateral in accordance with the swap documents.
In confirming the rating of the underlying transaction, Moody's noted the strong performance of the asset pool, with cumulative defaults of 0.64%, 90+ delinquencies stable at 0.46% as of last reporting date on 30 January 2014, and that the pool is now amortising following the end of the reinvestment period. Because of this positive performance, Moodys expects enhancement to increase from its current level of 30.9% and will provide sufficient cushion to insulate the transaction against counterparty risk.
Moody's has not updated its key modelling assumptions for this deal, because the deal's performance is in line with the rating agency's expectations.
Emirates NBD Auto Financing (the repack) is a repackaging of the underlying transaction notes where the main risk is that of the underlying transaction. The repackaged note also benefits from a principal guarantee from Japan Bank for International Cooperation (JBIC) (Aa3). As such, investors have first recourse to JBIC irrespective of losses on the underlying transaction. Because the Emirates NBD Auto Financing Limited transaction is a repackaging of the underlying notes and benefits from a principal guarantee by JBIC, its Aa2 (sf) rating reflects the higher of the two ratings (i.e., the underlying transaction).
The rating of the series APC notes in Emirates NBD Auto Finance Limited (the underlying transaction) incorporates a strong level of credit linkage to Emirates NBD PJSC ( Emirates; Baa1/P-2) as the swap counterparty for a balance guaranteed swap that converts the UAE Dirham proceeds into Japanese yen in order to pay the amounts due under the notes.
Today's rating action concludes the review of the rating on the series APC notes in the underlying transaction, which Moody's placed on review on 14 November 2013. The review focused on the swap counterparty exposure following Moody's introduction of the rating agency's updated approach to assessing swap counterparties in structured finance cash flow transactions ("Approach to Assessing Swap Counterparties in Structured Finance Cash Flow Transactions", published on 12 November 2013: https://www.moodys.com/research/Approach-to-Assessing-Swap-Counterparties-in-Structured-Finance-Cash-Flow--PBS_SF344857).
As part of its review of the underlying transaction, Moody's has incorporated the risk of additional losses on the notes, in case the notes become unhedged following a swap counterparty default. Assets backing the notes in this deal are fixed-rate assets denominated in UAE Dirham, while the notes are referenced to Yen Libor. The transaction includes a swap agreement with Emirates to hedge the currency risk. Net swap payments in recent periods were in favour of the swap counterparty; given the current interest-rate environment however, future net swap payments could be in favour of the issuer.
Moody's understands that the swap is currently out of the money for the issuer. However, due its Baa1 rating, Emirates is posting collateral in accordance with the swap documents.
In confirming the rating of the underlying transaction, Moody's noted the strong performance of the asset pool, with cumulative defaults of 0.64%, 90+ delinquencies stable at 0.46% as of last reporting date on 30 January 2014, and that the pool is now amortising following the end of the reinvestment period. Because of this positive performance, Moodys expects enhancement to increase from its current level of 30.9% and will provide sufficient cushion to insulate the transaction against counterparty risk.
Moody's has not updated its key modelling assumptions for this deal, because the deal's performance is in line with the rating agency's expectations.
Emirates NBD Auto Financing (the repack) is a repackaging of the underlying transaction notes where the main risk is that of the underlying transaction. The repackaged note also benefits from a principal guarantee from Japan Bank for International Cooperation (JBIC) (Aa3). As such, investors have first recourse to JBIC irrespective of losses on the underlying transaction. Because the Emirates NBD Auto Financing Limited transaction is a repackaging of the underlying notes and benefits from a principal guarantee by JBIC, its Aa2 (sf) rating reflects the higher of the two ratings (i.e., the underlying transaction).
Source:
Mubasher
