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Tuesday, March 10, 2009


RBS tests the ABCP waters

via alphaville

Moody’s Investors Service has assigned a definitive rating of Prime-1 to the asset backed commercial paper (”ABCP”) issued by Churchill Loan Asset Securitisation Programme LLC (”Churchill”). Churchill is a newly established, fully supported, prior review ABCP programme sponsored by Royal Bank of Scotland (’RBS’) (Aa3/P-1/C-). Churchill will issue ABCP in the U.S. and European markets up to a maximum programme limit of US$ 40 billion.

“Churchill” will see a first tranche issued imminently, backed by £5.5bn of prating car insurance adverts consumer loans.

If things go to plan, the move should untie a significant amount of capital. It’s also potentially exactly the kind of transaction we need to see happening if there is ever going to be a rejuvenation of credit, and with it, the economy.

But here’s the crucial par from the Moody’s statement, which, in homage to the issue’s nom de plume, we’re dubbing “the Dunkirk clause”:

The transaction is fully supported by a liquidity facility, in the form of a committed note purchase facility, provided by Prime-1 rated RBS which can be drawn by Churchill at any time.

RBS is on the hook to roll all the CP, if buyers don’t bite. Pretty standard conduit clause fare, to be sure. In the current environment though, worth bearing in mind. This isn’t exactly the clean-cut transfer of credit risk RBS would perhaps ideally like to see.

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