DBRS Downgrades Palladium Securities 1 SA Series 112 Notes–Collateral Guarantor Enel SpA to BBB (sf)

DBRS Ratings Limited (“DBRS”) has today downgraded from BBB (high) (sf) to BBB (sf) the ratings on the EUR 100 million Series 112 Floating Rate Notes due 2023 (the “Notes”) issued by Palladium Securities 1 S.A. acting in relation to Compartment 112-2013-12 (the “Issuer”).

The Issuer is a public limited liability company (société anonyme) incorporated under the laws of the Grand Duchy of Luxembourg. The transaction is a cash flow securitisation collateralised by a corporate bond issued by Enel Finance International NV (the “Collateral”), which is guaranteed by Enel SpA (the “Collateral Guarantor”). The noteholders and other transaction counterparties have recourse only to the assets in Compartment 112-2013-12 in accordance with Luxembourg law.

The transaction is a credit linked note (“CLN”) in which the Issuer uses an asset swap (the “Asset Swap”) to transform the payout profile of a debt security. The noteholders are effectively exposed to the risk that either the Collateral or the counterparties default. The transaction documents do not contain any downgrade provisions with respect to Deutsche Bank AG, London Branch (acting as the Hedging Counterparty) or to Deutsche Bank Luxembourg SA (acting as the Custodian). As such, DBRS regards the rating of the Notes to be linked to those of the Collateral and the lowest-rated of these counterparties.

DBRS maintains an internal assessment on the Collateral Guarantor to evaluate the credit risk of the Collateral and monitor its credit risk on an ongoing basis. DBRS does not rate the Collateral or the Collateral Guarantor. The internal assessment of the Collateral Guarantor is an opinion regarding its creditworthiness based primarily upon pubic ratings. Internal assessments are not ratings, and are not published.

The current rating action is a result of a review and update on such internal assessment that DBRS maintains on the Collateral Guarantor.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable is “Rating Methodology for CLOs and CDOs of Large Corporate Credit”. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

The sources of information used for this rating include Palladium Securities 1 SA and other public sources.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance. The extent of any factual investigation or independent verification depends on facts and circumstances.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

As this is a CLN, sensitivity analysis is not applicable.

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Simon Ross
Initial Rating Date: 16 April 2013
Initial Rating Committee Chair: Jerry van Koolbergen

Last Rating Date: Not applicable as this is the first review/update after the Initial Rating.

Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Glen Leppert

DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

“Legal Criteria for European Structured Finance Transactions”
“Derivative Criteria for European Structured Finance Transactions”
“Master European Structured Finance Surveillance Methodology”

The lead responsibilities for this transaction have been transferred from the initial lead analyst to Alfonso Candelas.