CHICAGO--()--Fitch Ratings has downgraded the certificates issued by Latam Trust Series 2007-108 (Latam 2007-108, the Issuer) as follows:
--CLP 5,081,500,000 certificates to 'BBB+sf' from 'A-sf'; Outlook Stable.
The downgrade follows Fitch's downgrade of HSBC Finance Corporation (rated 'A+' with a Stable Outlook by Fitch) as issuer of the eligible investments to the transaction, HSBC Finance Corporation subordinated notes (CUSIP US441812JZ8, rated 'A+') on Dec. 7, 2012. Fitch monitors the performance of the underlying risk-presenting entities and adjusts the rating accordingly through application of its current credit-linked note (CLN) criteria, 'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' dated Feb. 22, 2012.
The rating considers the credit quality of HSBC Finance Corporation and the reference entity, Morgan Stanley (CUSIP 617446HC6, rated 'A' with a Stable Outlook). The Rating Outlook reflects the Outlook on the main risk driver, Morgan Stanley, which is the lowest rated risk-presenting entity.
Latam Trust Series 2007-108 is a single name CLN transaction designed to provide credit protection on Morgan Stanley with a reference amount of CLP 5,081,500,000 (or USD10 million; fixed exchange rate at closing). This protection is arranged through a credit default swap (CDS) between the Issuer and the swap counterparty, Merrill Lynch Capital Services (MLCS), guaranteed by Merrill Lynch & Co., Inc. (rated 'A' with a Stable Outlook). Proceeds from the issuance of the certificates were used to purchase USD10 million of HSBC Finance Corporation (CUSIP 441812JZ8) as a collateral asset for the CDS. The certificates are rated to the payment of interest and principal per the transaction documents. All payments are made in USD amounts adjusted according to both the value of the Undidad de Fomento (UF) and the CLP/USD exchange rate as outlined in the transaction documents.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The information used to assess this rating was sourced from the originator and the public domain.
Applicable Criteria & Related Research:
--'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' (Feb. 22, 2012);
--'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012).
Applicable Criteria and Related Research:
Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes
Counterparty Criteria for Structured Finance Transactions