Fitch: No Rating Impact on Coral's CP from Programme Amendment

FRANKFURT, Germany & LONDON--()--Fitch Ratings says there is no rating impact on the commercial paper (CP) issued by Coral Capital Ltd./Coral Capital LLC (Coral) following a programme amendment, executed on 10 December 2014. Thus, the agency has maintained its 'F1+' short-term IDR assigned to the CP issued by Coral.

The amendment lowers the minimum rating requirements for the programme account bank, transaction account bank, programme administrator, and cash administrator (the ancillary counterparties) to one notch below the current CP rating. Deutsche Bank AG (Deutsche Bank, A+/Negative/F1+) currently fulfills all ancillary counterparty roles. Prior to the amendment, only entities rated at or above the current CP rating were eligible as ancillary counterparties.

The CP rating is linked to the short-term IDR of DZ Bank AG (DZ Bank, A+/Stable/F1+). DZ Bank is the programme sponsor and provides full liquidity support to the programme to cover the entire credit risk of purchased assets, and to ensure timely repayment of maturing CP. The liquidity facility can be drawn by Coral to repay CP even if funds held at the programme or transaction account bank are commingled with the insolvency estate in the event of either bank's default. Based on the coverage of the liquidity facility, the credit risk in relation to the amendment is limited since Coral's CP is not exposed to the credit quality of the ancillary counterparties but rather to the credit risk of DZ Bank.

Additionally, operational risk in relation to the ancillary counterparty roles is also limited. In Fitch's view, DZ Bank is capable of performing the programme administrator and cash administrator functions on short notice in case of non-performance of Deutsche Bank. Administrative tasks include, among others, calculating liquidity draws, tracking maturing CP, and preparing various data reports.

A letter of emergency assistance issued by DZ Bank for the benefit of Coral supports DZ Bank's commitment to assume certain or all administrative tasks if requested and until a non-performing or insolvent ancillary counterparty is replaced. Fitch also views DZ Bank as capable of performing the programme and transaction account bank roles. DZ Bank could open new transaction accounts for Coral to ensure a proper flow of funds between collections from the asset portfolio, maturing and newly issued CP, and draws from the liquidity facility.

In the event of a termination of any of the ancillary counterparties, Coral, acting through its directors, ultimately decides on the replacement of the counterparty. Such process includes the consultation of programme beneficiaries; DZ Bank as liquidity provider and programme sponsor can reasonably be expected to be among these beneficiaries. In case of non-acceptance of DZ Bank as an ancillary counterparty and failure to appoint an alternative replacement, the programme may be exposed to a period of non-performance of administrative tasks. Fitch deems the operational risk of replacement to be limited since Coral has a strong incentive to accept DZ Bank as an immediately available and capable counterparty to continue operations.

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

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Contacts

Fitch Ratings
Thomas Krug, CAIA
Analyst
+49 69 768076 252
Fitch Deutschland GmbH
Taunusanlage 17
D-60325 Frankfurt am Main
or
Selena Greaney
Senior Director
+44 20 3530 1135
or
Media Relations:
Athos Larkou, +44 203 530 1549, London
athos.larkou@fitchratings.com

Contacts

Fitch Ratings
Thomas Krug, CAIA
Analyst
+49 69 768076 252
Fitch Deutschland GmbH
Taunusanlage 17
D-60325 Frankfurt am Main
or
Selena Greaney
Senior Director
+44 20 3530 1135
or
Media Relations:
Athos Larkou, +44 203 530 1549, London
athos.larkou@fitchratings.com