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S&P Assigns Prelim Ratings in AXA's Hybrid CDO Jazz.

LONDON -- Standard & Poor's today assigned its ratings to the floating-rate notes to be issued by special-purpose entity Jazz CDO I B.V. (see list below).

The collateral backing the notes is a portfolio of investment-grade debt securities (bonds, loans, and structured finance securities) and synthetic assets (total return swaps and credit default swaps) managed by AXA Investment Managers Paris S.A.

"The most unique feature of this arrangement is that the deal is the first hybrid cash/synthetic arbitrage collateralized debt obligation (CDO) that uses a liquidity facility," said Katrien Van Acoleyen, associate at Standard & Poor's Structured Finance Ratings group in London.

Under the liquidity facility, the liquidity provider (Deutsche Bank AG, London branch) agrees to make available to the issuer a revolving credit facility, under which the issuer may draw down advances with an aggregate principal amount equal to EUR1.7 billion.

Ms. Van Acoleyen explained further that Jazz combines elements of a cash flow arbitrage CDO with elements of a synthetic CDO.

"The hybrid nature of the transaction means that the collateral manager can purchase cash obligations (bonds, loans, and structured finance securities), enter into total return swaps, and/or enter into credit default swaps (either to buy protection or sell protection). Further, the liability structure combines a funded and an unfunded element," she said.

"Apart from selling assets as in a traditional cash CDO, the manager can also close out positions by entering into offsetting credit default swaps. Furthermore, the manager is also allowed to enter into naked short transactions by purchasing protection without having exposure," Ms. Van Acoleyen concluded.

The preliminary ratings on the notes reflect:

-- The expected commensurate level of credit support in the form of subordination provided by the notes junior to the respective classes;

-- The cash-flow structure, which is subject to various stresses requested by Standard & Poor's;
 -- The experience of the collateral manager;
 -- The adequate ratings on the various counterparties;


-- The coverage of interest-rate and currency risk through hedge agreements; and

-- The legal structure of the transaction, which includes the bankruptcy-remoteness of the issuer.

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 http://www.ratingsdirect.com/. The report is also available on Standard & Poor's Ratings Services Web site at http://www.standardandpoors.com/. Under Presale Reports, select Structured Finance, then Asset-Backed Securities.
 PRELIMINARY RATINGS ASSIGNED
 Jazz CDO I B.V.
 EUR270 million floating-rate notes due 2011
 Class Rating Amount (Mil. EUR)
 A AAA 78
 B AA 78
 C A- 27
 D BBB 27
 E N.R. 60
 N.R.--not rated.


Contact: Katrien van Acoleyen, London, +44-20-7826-3860, or George H. Sun, New York, +1-212-438-6232, both for Standard & Poor's Ratings Services

Website: http://www.standardandpoors.com/ratings
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Date:Feb 7, 2002
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