January 10, 2013 / 11:15 AM / 5 years ago

TEXT-S&P rates FCT Water Dragon's $182 million guaranteed notes

Jan 10 -

OVERVIEW

-- We have assigned our 'A' rating To FCT Water Dragon's $182 million guaranteed notes.

-- FCT Water Dragon is a bankruptcy-remote special-purpose entity incorporated under French law (fonds commun de titrisation).

Standard & Poor's has assigned its 'A ' credit rating to FCT Water Dragon's $182 guaranteed notes. FCT Water Dragon is a French bankruptcy-remote special-purpose entity (FCT; fonds commun de titrisation).

At closing, FCT Water Dragon issued $182 million floating-rate notes, the proceeds of which were used to issue a secured loan to Societe Anonyme De Credit A L'Industrie Francaise (CALIF) (not rated). Societe Generale (A/Negative/A-1) unconditionally and irrevocably guarantees the payments made by CALIF to FCT Water Dragon under the loan.

The loan is collateralized by a portfolio of unrated loans. Under a collateral security agreement, an overcollateralization mechanism is in place to ensure that the value of the underlying collateral exceeds the notional value of the notes. If additional collateral must be pledged, CALIF has the option to add more eligible collateral under the loan or to deposit cash in a bank account held with The Hongkong and Shanghai Banking Corp. Ltd. (HSBC; AA-/Stable/A-1+).

Note that we do not give any credit to this overcollateralization mechanism and our analysis relies instead on the guarantee provided by Societe Generale to CALIF. This guarantee complies with our criteria (see European Legal Criteria For Structured Finance Transactions," published on Aug. 28, 2008).

The interest (three-month U.S. dollar LIBOR plus a margin) and principal payments under the loan will be passed through the FCT to the noteholders. The notes have a three-year maturity.

Additionally, the FCT noteholders entered into a deed of guarantee with Societe Generale, which acts as guarantor for the notes. Societe Generale's guarantee effectively covers the difference between all payments due and payable on the notes and the payments (if any) made by CALIF to the bank account (i.e, it does not cover cash deposits made by CALIF to the bank account with HSBC).

As a result, we have assigned the lower of our long-term ratings on Societe Generale and HSBC to FCT Water Dragon's notes. The 'A' rating on the notes does not consider the credit quality, or any other matters relating to, the underlying assets of the loan.

We consider the issuer to be in line with our European legal criteria for bankruptcy-remoteness (see "European Legal Criteria For Structured Finance Transactions," published on Aug. 28, 2008).

RELATED CRITERIA AND RESEARCH

Related Criteria

-- Counterparty Risk Framework Methodology And Assumptions, Nov. 29, 2012

-- European Legal Criteria For Structured Finance Transactions, Aug. 28, 2008

-- Criteria For Rating Synthetic CDO Transactions: Other Synthetic Structures, Sept. 1, 2004

Related Research

-- What's Behind The Updates To The Counterparty Risk Criteria Framework And Related Criteria? Nov. 29, 2012

-- Standard & Poor's Ratings Definitions, June 22, 2012

-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012

-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors

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