Fitch Expects to Rate Redding Funding's $1.2B Secured Support Notes 'A'

CHICAGO--()--Fitch Ratings expects to assign an 'A' rating to Redding Funding Ltd.'s (Redding Funding) issuance of $1.2 billion secured support notes due Dec. 31, 2058. Redding Funding is a Nova Scotia-domiciled wholly owned subsidiary of Wilton Re Ltd.

KEY RATING DRIVERS

Fitch's rating on the secured support notes considers the transaction structure, the financial strength of Wilton Re Ltd. and the quality of the invested assets held in the collateral account as security. While there are some structural elements to the transaction, ultimately Fitch is rating this transaction as secured corporate debt, and not structured financing. This, in part, reflects the fact that the issuer, Redding Funding, is wholly owned by Wilton Re Ltd. and is not sufficiently segregated from Wilton Re Ltd. to support use of structured finance criteria.

The newly issued secured support notes will hold a first-priority perfected security interest in the $1.2 billion in assets maintained in the collateral security account. The assets in the collateral account will ultimately be funded by a contribution from the Canada Pension Plan Investment Board (CPPIB). Wilton Re Ltd. is a wholly owned subsidiary of CPPIB. In addition, Wilton Re Ltd. will provide a guaranty of the obligations of the secured support notes. The guaranty will be subordinated to Wilton Re Ltd.'s existing senior debt obligations. The guaranty will cover both the counterparty credit risk of Redding Funding, and market risk of the invested assets held in the collateral account.

Since Fitch views the secured support notes as a secured debt obligation, the rating for the secured support notes is notched from guarantor Wilton Re's long-term Issuer Default Rating (IDR) of 'A-'. The degree of notching is based primarily on the assumed relative recoveries of the obligations in the event of default/failure. For the secured support notes, a baseline recovery assumption of Superior was used based on an analysis of asset performance under stress. Thus, the secured support notes are notched up one notch from the IDR.

Fitch expects the secured support note issuance to be used to fund statutory reserve requirements for a block of life insurance policies ceded by Wilton Reassurance Company to Redding Reassurance Company 2, a South Carolina-domiciled special purpose financial captive insurance company.

RATING SENSITIVITIES

The ratings on the notes may change if either the quality of the assets in the collateral account changes, implying use of a different recovery assumption, or Wilton Re Ltd's IDR changes.

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

Applicable Criteria and Related Research:

--'Insurance Rating Methodology', dated Sept. 4, 2014.

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=962075

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Contacts

Fitch Ratings
Primary Analyst
Tana M. Higman
Director
+1 312-368-3122
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Douglas L. Meyer, CFA
Managing Director
+1 312-368-2061
or
Committee Chairperson
Keith M. Buckley, CFA
Managing Director
+1 312-368-3211
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Tana M. Higman
Director
+1 312-368-3122
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Douglas L. Meyer, CFA
Managing Director
+1 312-368-2061
or
Committee Chairperson
Keith M. Buckley, CFA
Managing Director
+1 312-368-3211
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com