Fitch Places SPICES 2005-1 on Negative Watch

NEW YORK--()--Fitch Ratings has placed the notes issued by SPICES Finance Limited Series 2005-1 (SPICES 2005-1) on Rating Watch Negative:

--JPY5,363,000,000 notes at 'Asf'.

KEY RATING DRIVERS

Fitch's rating of the notes is credit-linked to the rating of AT&T Inc. (AT&T), the issuer of the qualified investment, AT&T senior unsecured notes (ISIN US78387GAQ64). AT&T's Issuer Default Rating is 'A', Negative Rating Watch.

RATING SENSITIVITIES

The rating remains sensitive to Fitch's rating of AT&T. A change in Fitch's rating of the issuer of the qualified investment, would likely result in a revision in the rating of the notes.

SPICES 2005-1 is a credit-linked structure whereby the noteholders obtained credit exposure to the qualified investment via a cross-currency swap. Note proceeds were used to purchase $50 million notional of the qualified investment. The Issuer passes through the interest received on the qualified investments to Australia & New Zealand Banking Group (ANZ Bank) and ANZ Bank makes semi-annual interest payments in JPY to the noteholders. At maturity, the Issuer will pass through the par amount received on the qualified investments to ANZ Bank and in return, ANZ Bank will pay the JPY equivalent using a fixed exchange rate to the noteholders . The notes' rating is delinked from the swap counterparty, ANZ Bank (rated 'AA-/F1+', Outlook Stable) through requirement to collateralize future payments or find a replacement upon ANZ Bank's downgrade below 'A/F1'.

The terms of the qualified investment allow the qualified investment issuer to exercise an early make-whole call. This exercise would cause an early termination event and could expose the SPICES 2005-1 notes to potential termination payments to the swap counterparty and currency exchange risk. However, in Fitch's opinion, exercising of this call is very unlikely, due to the make-whole condition that leads to a substantial premium over par required to be paid by the issuer of the qualified investment. Fitch views the current probability of loss on the notes from the exercise of a make-whole call as sufficiently remote at the current rating level.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Global Structured Finance Rating Criteria' (August 4, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);

--'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' (February 2014).

Applicable Criteria and Related Research:

Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=729785

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=892254

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Surveillance Analyst:
Shashi Srikantan, +1-212-908-0393
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Alina Pak, +1-312-368-3184
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Surveillance Analyst:
Shashi Srikantan, +1-212-908-0393
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Alina Pak, +1-312-368-3184
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com