CHICAGO--(BUSINESS WIRE)--Fitch Ratings has placed the following notes issued by Signum Finance Cayman Limited series 2010-09 (Signum 2010-09) on Rating Watch Negative:
--$200,000,000 secured variable-rate notes 'A+sf'; Rating Watch Negative.
The Negative Watch status assigned to the notes is based on the watch status of Goldman Sachs Group Inc. as the highest risk-presenting factor in Signum 2010-09. Fitch placed Goldman Sachs Group Inc.'s 'A+' Issuer Default Rating on Negative Watch on Oct. 13, 2011.
Fitch's credit analysis of the notes is credit-linked to the ratings of Goldman Sachs Group Inc., as guarantor to Goldman Sachs International (GSI), the swap counterparty and backup collateral assets settlement provider (CASP), as well as the excess-mortality experience of the defined insurance block. The swap counterparty guarantor and the collateral assets issuer are the same, and are therefore treated as one risk-presenting factor. Using the ratings of these risk-contributing factors in the transaction, Fitch applied the two-risk CLN matrix under the Fitch criteria titled 'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' dated Feb. 24, 2011 to quantify the effect on the rating of the notes.
Goldman Sachs Group Inc., as guarantor of GSI, is considered the highest risk-presenting factor in this transaction. The highest risk-presenting factor is considered the 'weakest link', as it contributes the most risk to the transaction in terms of probability of default. The 'additional risk' from the second risk-presenting factor comes from the mortality experience of a defined block of level-term life insurance policies under the excess mortality swap agreement. The cumulative actual to expected mortality experience was within the original modeling expectations of 'AA' as of Fitch's last review in July 2011. Since the placement of Goldman Sachs Group Inc. on Negative Watch is the primary driver of the current rating action, no additional analysis was done on the insurance block's performance.
The issuer is a bankruptcy-remote, special purpose vehicle (SPV) established to issue the notes, the proceeds of which are used to purchase collateral assets in the form of 15-year senior unsecured bonds issued by Goldman Sachs Group Inc. The issuer also entered into a 15-year swap with GSI as the swap counterparty. Under the mortality swap, the SPV will provide mortality protection on a defined block of U.S. level-term life insurance policies. The SPV will make payments to GSI in the event actual mortality experience of the defined block exceeds specified trigger levels, while the fixed payments from GSI to the SPV will be paid to investors in the notes. An agreement with the CASP provides for a return of par value to the issuer in exchange for a principal amount of the collateral assets equivalent to the payment due from the issuer to the noteholder in the event of an early redemption due to a cancellation event under the mortality swap, or from the issuer to the swap counterparty following a loss. GSI serves as the Backup CASP, providing for the full payment of par value should the CASP default in its obligations under the agreement.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The information used to assess this rating was sourced from the reinsurer reports and the public domain.
Applicable Criteria & Related Research:
--'Global Rating
Criteria for Single- and Multi-Name Credit-Linked Notes' (Feb. 24, 2011);
--'Insurance-Linked
Securities' (Aug. 11, 2011);
--'Counterparty Criteria for
Structured Finance Transactions' (Aug. 9, 2011).
Applicable Criteria and Related Research:
Counterparty Criteria for
Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=605425
Global
Rating Criteria for Single- and Multi-Name Credit-Linked Notes
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=602145
Insurance-Linked
Securitizations
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647789
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