Fitch Rates Morrigan TRR Funding LLC's ABCP Program 'F1'.

NEW YORK -- Fitch Ratings has assigned an 'F1' rating to Morrigan TRR Funding LLC's (Morrigan) asset-backed commercial paper (CP) program. The rating is based on the terms and conditions of the related swap agreements which pay for the full face amount of the notes, the administrative capabilities of HI Asset Management, Inc. (HI Asset Management) and the program's sound legal structure.

Morrigan, sponsored by HI Asset Management, is a bankruptcy remote, special purpose Delaware limited liability company established to issue U.S.-dollar denominated CP with maturities of up to 270 days and secured liquidity notes (SLNs) with expected maturity dates of up to 270 days from the date of issuance. If Morrigan is unable to repay the SLNs on their expected maturity date, they may be extended. The extended notes have a legal final maturity of up to 397 days from the original date of issuance. The proceeds from the issuance of the CP and SLNs (collectively, the notes) will be used by Morrigan to fund the purchase of various financial assets, including, but not limited to, equities, bonds, loans, preferred stock, and other financial instruments compatible with a total rate of return swap. HI Asset Management serves as referral agent and evaluates opportunities for possible investment by Morrigan. Morrigan Holding Corp. is the sole member of Morrigan.

The timely repayment of the notes is ensured by total rate of return swaps with Hypo Real Estate Bank International (Hypo International) as swap counterparty. The swap will cover all credit, interest rate, exchange rate, and market value risk. The program is structured to rely on the unconditional repayment of all swaps by the counterparty on the day the notes mature, and therefore, the program does not use a separate liquidity facility. Hypo International serves as hedging agent and is responsible for ensuring that all of the aforementioned risks are hedged. Hypo International arranges for the execution of all swaps, which are in the form of the ISDA Master Agreement or other form subject to review by Fitch.

When Hypo International is rated less than 'F1' or its equivalent, it must enter into a back-to-back swap agreement for each asset with a third party with a rating of at least 'F1' or its equivalent. The back-end swaps must reference the same assets as the assets specified in the first-tier swap and provide for payment dates, valuation dates, and/or termination dates that are the same as the corresponding first-tier swap. The material terms of the back-end swap must be substantially identical to the material terms in the first-tier swap. The ultimate risk to noteholders, then, is the failure of the back-end swap provider to perform under the back-end swap. As long as Hypo International is rated less than 'F1' or its equivalent, Hypo International will pledge to Deutsche Bank Trust Company as the collateral agent, for the benefit of Morrigan, a continuing first priority security interests in and a first lien upon, all of Hypo International's right, title and interest in the swap agreements between Hypo International and each third party, the swap collection account, and all related proceeds.

HI Asset Management serves as Morrigan's administrative agent, performing various duties on behalf of Morrigan, including coordinating the issuance, sale and timely repayment of the notes and arranging for the execution of all documentation by Morrigan in connection with the purchase of the assets. HI Asset Management is a wholly-owned subsidiary Hypo International.