Fitch Rates SEQUILS-Liberty, Ltd. & MINCS-Liberty, Ltd.
NEW YORK--(BUSINESS WIRE)--Nov. 20, 2001
Fitch rates the $80 million class A-1 senior secured variable funding notes and the $292 million class A-2 senior secured floating-rate notes of SEQUILS-Liberty, Ltd. (SEQUILS) 'AAA'. Fitch also rates the $28 million class B second priority senior secured floating rate-notes 'A'. The SEQUILS notes mature in 2013. In addition, Fitch rates the $52 million floating-rate third priority secured notes of MINCS-Liberty, Ltd. (MINCS) 'BBB'. The MINCS notes mature in 2013.
SEQUILS-Liberty, Ltd. (SEQUILS), is a $400 million collateralized loan obligation established to invest in a diversified portfolio of primarily senior secured bank loans. The synthetic equity for SEQUILS is provided in the form of a credit default swap with Morgan Guaranty Trust Co. of New York (MGT), rated 'AA' by Fitch. MGT enters into a subsequent credit default swap with MINCS-Liberty, Ltd. (MINCS), a special purpose vehicle capitalized with $52 million of floating rate notes.
The par value of the MINCS notes equates to 13% of the par value of the SEQUILS notes, matching the synthetic equity threshold provided by MGT to SEQUILS under the credit default swap. The second swap provides MINCS noteholders a 7.7 times (x) leveraged interest in the yield on the $400 million pool of senior secured bank loan investments and affords MGT the ability to hedge its exposure under the credit default swap.
INVESCO Senior Secured Management, Inc. (INVESCO) will manage the SEQUILS bank loan portfolio according to predefined investment criteria and diversification requirements as outlined in the transaction documents. Fitch has met with INVESCO to review the credit underwriting and workout procedures employed for senior secured bank loans. Fitch finds their capabilities to be satisfactory for this transaction.
The ratings of the SEQUILS notes address the timely payment of interest and the ultimate payment of principal. The ratings of the MINCS notes addresses the timely payment of Basic Interest at London Interbank Offered Rate (LIBOR) plus 1.75% and the ultimate payment of principal, but do not address the payment of any additional or supplemental interest. The ratings are based upon the strength of MGT as Swap Counterparty, the asset quality of the loan portfolio, available credit enhancement, and the sound legal structure of the transaction.