DBRS Rates International Securities Trading Corporation Limited at BBB Senior, BBB (low) Subordinated

Dominion Bond Rating Service (“DBRS”) has initiated coverage on International Securities Trading Corporation Limited (“ISTC” or the “Company”) and has assigned an Issuer and Senior Unsecured Long-Term Debt rating of BBB and a provisional rating of BBB (low) to the Company’s planned Subordinated Debt. The trend on the ratings is Stable.

The ratings reflect ISTC’s adequate risk profile as a non-regulated financial institution, which, however, (1) adheres to self-imposed investment and business policies and reporting guidelines very similar to a regulated credit institution, and (2) has as its main business purpose to invest in hybrid capital securities issued and asset-backed securities originated by banks.

ISTC’s adequate financial fundamentals include robust capitalization, considering its relatively low credit and market risks, but also market-sensitive wholesale funding and less controllable risks arising from the fact that ISTC is a start-up entity and not regulated as a credit institution. DBRS expects ISTC to prudently develop its short- to medium-term strategic goals of building a portfolio of approximately €3.5 billion to €5.0 billion, establishing its reputation with issuers and suppliers of funding, and building up a stable income stream.

The Company’s business model is coherent and sustainable, but executing its growth strategy with limited downside risk will be essential to preserve the credit fundamentals underpinning the current rating. DBRS expects ISTC to avoid risks that it cannot control, such as diversifying its investments away from the credit institution sector or its emphasis on developed markets. DBRS aims to evaluate any changes in the Company’s business and revenue mix that could affect its credit outlook.

ISTC’s plan to grow its funding base, specifically gaining access to unsecured funding and diversifying financing sources, underpins the current rating levels. The Company’s appetite for market risk, specifically interest and currency risk, is expected to be conservatively measured, allowing management an efficient hedging of the inherent mismatch between assets and liabilities. ISTC’s liquidity is safeguarded by a liquidity reserve, which is set following a sophisticated liquidity model for an operation of its size. DBRS adds that ISTC’s capitalisation during the ramp-up period (expected until the end of 2007) is robust in view of its relatively low credit and market risk, but that the potential effect of both rising bank credit risk and a sudden spread widening for banks’ hybrid equity instruments could materially constrain ISTC’s growth perspective until market conditions improve again. In this context, DBRS cautions that an unexpected change in ISTC’s strategy and risk appetite, especially in developing an appetite for single large exposures, loosening liquidity guidelines, and leveraging aggressively the existing “share capital”, could have negative rating connotations.

DBRS notes that, at this time, there is little upside potential for ISTC’s rating, which at its level includes the view that the Company will successfully conclude the ramp-up period for its portfolio and will get access to unsecured funding. However, ISTC’s ratings would be more firmly underpinned by a greater variety of funding instruments and sources, especially through long-term unsecured funding and by growing their reserves over time.

Headquartered in Dublin, Ireland, International Securities Trading Corporation Limited is a private limited company established in July 2005. As of March 15, 2005, ISTC had a portfolio of €492 million of risk assets, from more than 50 transactions, and reported a net profit of €1.4 million.