S&P Assigns Prelim Rtgs to CYGNUS FINANCE PLC's Notes.Business Editors LONDON--(BUSINESS WIRE)--Standard & Poor's June 5, 2000--Standard & Poor's today assigned its preliminary ratings to the euro (Eur) 348.3 million floating-rate notes issued by CYGNUS Cygnus (sĭg`nəs) [Lat.,=the swan], northern constellation located SE of Draco and NW of Pegasus. It was depicted as a bird by most ancient cultures. FINANCE PLC, a special-purpose entity Special-Purpose Entity A financing technique in which a company decreases its risk by creating separate partnerships, rather than subsidiaries, for certain holdings and solicits outside investors to take on the risk. (SPE SPE - Software Practice and Experience ) (see list below). The preliminary ratings are based the adequate level of subordination underneath each class of notes; the amount of "excess spread" injected in the transaction by KBC Bank KBC Bank NV is a Belgian universal bank, focusing on private clients and small and medium-sized enterprises. Besides retail banking, insurance and asset management activities (in collaboration with sister companies KBC Insurance NV and KBC Asset Management NV), KBC Bank also NV (KBC KBC Kenya Broadcasting Corporation KBC Kaun Banega Crorepati (Indian TV show) KBC Koahnic Broadcast Corporation (Anchorage, Alaska) KBC Keyboard Connector KBC Kill Before Capture ; single-'A'-plus/Stable/'A-1') through swap counterparty payments; the sound mechanics of the repurchase agreement Repurchase agreement An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. and the credit default swap Credit Default Swap A swap designed to transfer the credit exposure of fixed income products between parties. Notes: The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. ; the characteristics of the securities of the Kingdom of Belgium (double'A'-plus/Stable/'A-1'-plus) as collateral; and the sound legal structure of the transaction. CYGNUS FINANCE is KBC's first European collateralized loan obligation Collateralized loan obligation (CLO) A security backed by a pool of commercial or personal loans , structured so that there are several classes of bondholders with varying maturities, called tranches. Similar in structure to Collateralized Mortgage Obligations. (CLO CLO See: Collateralized Loan Obligation. ). KBC's goal is to achieve regulatory capital relief by transferring the credit risk associated with a portfolio of credit exposures to corporates and finance companies to investors. This transfer will be achieved by combining a funded credit default swap between CYGNUS FINANCE and KBC and an unfunded "super senior" credit default swap with a counterparty. On exhaustion of the amount of excess spread in the cash collateral account, losses on the portfolio will be applied as a reduction of the outstanding rated notes starting with the unrated ones. Once all the notes have been so amortized, the counterparty will be entitled to claim further protection under the unfunded credit default swap. The purpose of this report is to describe the rating methodology used for the funded portion of the transaction only. The proceeds from the issuance of the notes will be used to purchase securities (Obligations Lineaires, OLOs) issued by the Kingdom of Belgium via a repurchase agreement with KBC. The repurchase of this collateral through the repurchase agreement will secure the ultimate repayment of the principal of the notes. Timely interest payments will be met using a combination of payments under the repurchase agreement and swap counterparty payments under the credit default swap. The preliminary subordination levels have been established in line with Standard & Poor's rating criteria for balance sheet CLOs using a statistical approach based on the Standard & Poor's CLO-CBO default model. A copy of Standard & Poor's complete presale report for this transaction is available on RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. The report is also available on Standard & Poor's Ratings Services Web site at www.standardandpoors.com/ratings. Under Presale Reports, select Structured Finance, then Asset-Backed Securities, Standard & Poor's said.---CreditWire PRELIMINARY RATINGS ASSIGNED CYGNUS FINANCE PLC Eur348.3 Million Floating-Rate Notes Class Rating Amount (Mil. Eur) A AA+ 43.0 B A 193.5 C BB+ 81.7 D N.R. 30.1 N.R.-not rated. |
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