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Taiwan’s
First Trade Receivable Securitization Deal Assigned
'twA-2' Rating
| Analyst |
Jerry
Fang
Clementine Kiang
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Taiwan
Ratings Corp. today assigned its 'twA-2' short-term rating on the senior
trust certificates, in the form of short-term ABCP (asset-backed commercial
paper) Notes, issued by Land Bank of Taiwan as trustee for WPI AR Securitization.
The authorized program limit amount is NT$2.5 billion.
This transaction is Taiwan’s first trade receivable securitization, and
is also the first domestic transaction to tap short-term note funding.
The
rating addresses the full and timely payment of interest and the ultimate
repayment of principal by the final legal maturity date of the ABCP Notes,
which are secured by a revolving portfolio of New Taiwan dollar (NTD)
and/or US dollar (USD) denominated trade receivables originated by World
Peace Industrial (WPI), an unrated seller. The receivables trustee, Land
Bank of Taiwan, issued discounted Notes with a tenor of one month on the
closing date and will continue to issue such Notes with a typical tenor
of one month on a monthly basis..
The
rating on the Notes to be purchased by the Notes Issuance Facility (NIF)
Provider, China Bills Finance Corporation (China BFC), reflects the following:
- The dynamic resetting
mechanism for credit enhancement based on portfolio performance. The
credit enhancement is sufficient to mitigate credit risks associated
with the trade receivables;
- The liquidity facilities,
which will fund any shortfalls other than shortfalls that arise due
to obligor default, are subject to liquidity funding tests. Regarding
other risks, the Liquidity Facility Providers will take on commingling
risk, obligor set-off risks, servicer transition risk, and receivables
dilution risk, China BFC default risk, f/x swap counterparty default
risk, other counterparty risk and f/x risk. In the case of some but
not all of the aforementioned risks, the Liquidity Facility Providers
have negotiated a certain level of extra credit enhancement to reduce
their own exposure;
- The requirement
for ongoing periodic servicer audits and eligibility audits;
- The financial strength
of the Liquidity Facility Providers, eligible investments and bank account
providers meet the minimum rating requirements;
- The contract with
Land Bank of Taiwan as the Back-up Servicer; and
- The requirement
for bring-down opinions (legal opinions) on an annual basis at a minimum
The
full report "WPI AR Securitization" is available on Taiwan Ratings' website
at: http://www.taiwanratings.com
Analytic services provided by Taiwan Ratings Corporation (TRC) are the result of separate activities designed to preserve the independence and objectivity of ratings opinions. The credit ratings and observations contained herein are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. Accordingly, any user of the information contained herein should not rely on any credit rating or other opinion contained herein in making any investment decision. Ratings are based on information received by TRC. TRC has established policies and procedures to maintain the confidentiality of non-public information received during the ratings process.
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