Fitch Rates Zane Funding, LLC, Commercial Paper and Extendable Notes 'F1'.

NEW YORK -- Fitch assigns an 'F1' rating to Zane Funding, LLC's (Zane) $5 billion asset-backed commercial paper (ABCP) and extendible note program (EN), sponsored by Merrill Lynch Bank USA (MLBUSA; rated 'AA-/F1+' by Fitch). The proceeds from issuing the notes will be used to purchase receivables, debt securities, financial instruments, or other financial assets that meet the program's formal investment criteria. MLBUSA will be responsible for the day-to-day operations of the conduit, including identifying, negotiating, and acquiring all asset interests to be purchased by Zane. MLBUSA must receive prior confirmation from Fitch that the addition of assets to Zane will not result in a downgrade or withdrawal of Zane's 'F1' rating.

The CP will have expected maturities no greater than 270 days, and the ENs (collectively, the notes) will have expected maturity dates no greater than 90 days and final maturities of up to 270 days. The notes benefit from a programwide letter of credit (LOC) provided by MLBUSA and transaction-specific liquidity asset purchase agreements (LAPAs). The LOC is sized in an amount equal to:

--if the face amount of outstanding program notes is greater than $500 million, 8% of the outstanding face amount of notes;

--if the face amount of outstanding notes is greater than $40 million but less than or equal to $500 million, $40 million;

--if the face amount of outstanding notes is less than or equal to $40 million, 100% of the face amount of outstanding notes.

In the event notes cannot be issued to repay maturing ENs, MLBUSA as administrator will either repay the maturing notes by drawing on liquidity or extend the tenor of the ENs up to 180 days from the expected maturity date. The administrator is required to repay all extended noteholders by drawing upon liquidity and/or LOC by the legal final maturity date.

Zane will enter into a credit default swap with Cheyne Structured Solutions LLC as swap counterparty. The swap acts as first-loss protection pursuant to FIN 46 and is subordinated to the notes in terms of payment priority.

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