Corporate Australasian Securitisation Transactions Pty Ltd

Structured Finance

Asset-Backed New Issue

Corporate Australasian Securitisation Transactions Pty Ltd.

Rating Summary A$1,000,000,000 Commercial Paper Corporate Australasian Securitisation Transactions Pty Ltd.’s (CAST) A$1 billion Program ...... F1+ commercial paper program is rated ‘F1+’. The rating is based on the high quality Conduit Inception: December 1997. of receivables and other assets purchased by Corporate Receivables Securitisation Pty Ltd. (CRS), the required reserves dedicated to each receivables pool, a 10% Analysts fungible layer of credit enhancement, the liquidity support provided by Citibank, Suzanne L. Michaud N.A. (Citibank) and other highly rated financial institutions, a sound legal struc- 00111 212 908 0604 ture, and Citicorp Capital Markets Australia Ltd.’s (CCMAL) strong servicing [email protected] capabilities. Kevin Stephenson 02 9375 2171 CAST is a special purpose, bankruptcy-remote entity established for the sole [email protected] purpose of issuing commercial paper notes with maturities of up to 364 days. Net Ben McCarthy proceeds of the sale of commercial paper will be used to make loans to CRS. In 02 9375 2300 turn, CRS, a special purpose, bankruptcy-remote entity incorporated in New [email protected] South Wales (NSW), will use these proceeds to purchase pools of receivables from approved sellers or purchase highly rated asset-backed securities. Operating Agent Citicorp Capital Markets Australia Ltd. CRS will invest in high-quality receivables from a diversified group of Australasian Drew Riethmuller 02 9239 9969 sellers. Transactions will be structured to an investment-grade level. Primary [email protected] targets will be drawn from Citibank Australia’s existing customer base. Sellers rated below investment grade (or deemed below investment grade) may be Chris Van Homrigh eligible, as long as the purchased asset pools will have no adverse effect on CAST’s 02 9239 9118 [email protected] ratings.

Commercial Paper Dealers Substantial credit enhancement and liquidity support provide protection from Citisecurities Ltd. losses and ensure timely payment of the commercial paper notes. The first layer Commonwealth Bank of Australia of credit enhancement is a minimum loss reserve (generally in the form of Westpac Banking Corp. overcollateralisation) of 5%, though certain exceptions are made that enable loss reserves to be lower. Currently, the minimum loss reserve for asset pools is 10%. In addition to the reserves, there is a fungible 10% layer of loss protection. This layer consists of an irrevocable guaranty currently provided by Union Bank of Switzerland (UBS). UBS is rated ‘AAA/F1+’ for structured transactions by Fitch IBCA. This layer of enhancement can also be provided by other appropriately rated financial institutions.

Committed liquidity coverage will be maintained at a minimum of 100% in the form of revolving credit facilities. Third-party liquidity sources must be rated ‘F1+’. Currently, Citibank (70%) and UBS (30%) serve as liquidity banks.

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As operating agent, CCMAL evaluates pany loans from either CAST for Aus- to wind up CRS or take any other action and structures all asset purchases and tralian dollars or CASAL for US dollars. that may result in CRS being placed monitors asset performance to ensure com- under any form of insolvency admini- pliance with CRS’s credit and investment The operating agent, CCMAL, is a spe- stration until two years after the latest policy. CCMAL’s capable staff provides in- cialised group within Citicorp’s corpo- maturing note, thereby mitigating bank- depth credit expertise, solid structuring ca- rate finance area whose function is to ruptcy concerns. pabilities, and experience in identifying administer receivables securitisation and minimising asset deterioration. companies pursuant to their related Issuing and Paying Agent credit and investment policies. Its ac- Citisecurities Ltd. will act as the issu- Structural Overview tivities concerning CRS are governed ing and paying agent (IPA). Its role is CRS is an independently owned, bank- by operating and technical services to bring the commercial paper to mar- ruptcy-remote special purpose entity. It agreements. Price Waterhouse will con- ket and ensure the prompt and accurate was first incorporated in NSW in 1989, duct all conduit audits and serve as ac- payment of principal and interest to and was designed to look very much countant for CRS. noteholders. The IPA is also responsi- like Citicorp’s other multi-seller con- ble for the management of the final duits. CRS’s strategy is to assemble and Legal redemption of notes and servicing maintain a high-quality, well diversified The following safeguards have been noteholders claims for non-payment. It portfolio of Australasian receivables built into the program: is intended that the commercial paper pools. The majority of sellers identified ➢ All equity is held by an inde- be lodged with Austraclear. Commer- for the conduit have been drawn from pendent third party, Fecamp Hold- cial paper will be issued for a maximum Citibank Australia’s existing customer ings Pty Ltd. Fecamp is a limited of 364 days. base. Similar to other Citibank conduits, liability company. CRS has been gradually restructured ➢ Fecamp invested A$200,000; Ci- Sponsor History over the past nine years to broaden its tibank has no equity interest in CRS. Citibank is rated ‘AA/F1+’. Citibank capabilities. For example, it can now pur- ➢ Three board members were ap- was originally established in Australia chase longer term receivables, non-invest- pointed by Fecamp and are com- in 1965 as a representative office. In ment-grade sellers are allowed, and pletely independent of Citibank. 1985, Citibank Ltd. was granted a full receivables denominated in invest- banking license. In January 1996, Ci- ment-grade foreign currencies may be Some transactions may be structured with tibank was granted foreign banking included. an additional special purpose vehicle or authority to carry out banking business trust, which will issue a security that in Australia. Throughout Australia, Ci- Because the program and the conduit are CRS will purchase. The following tibank Ltd. has a group of 20 client man- established entities, Fitch IBCA will treat opinions have been obtained at the agers marketing to the top 200 domestic CRS like a specialised finance company CRS level: and multinational corporations. and will review transactions on a post-clos- ➢ Bankruptcy-remote status of CRS. ing basis (through monthly rating agency ➢ Nonconsolidation opinion. Globally, Citibank has been active in reports), as long as a transaction adheres to ➢ Tax opinion (nontaxability as a cor- securitisation since 1983, with eight the credit and investment policy. poration). conduits in the US, five in Europe, one in Japan, and now one in Australia. The Historically, CRS only had the ability to Prior to each transaction closing, CRS bank’s Australian securitisation busi- fund its purchases in the US commer- will obtain all right, title, and interest in ness started in 1989, when CRS was cial paper market through its wholly the underlying receivables and any re- originally set up. Technology was bor- owned subsidiary, Corporate Asset Secu- lated security, in accordance with the rowed from the bank’s CNAI group in ritization Australia Ltd. Inc. (CASAL), requirements of local law. It will also be New York to establish the administra- incorporated in Delaware. CAST (incor- granted first priority ownership (or se- tion and funding areas. Seven people porated in NSW will enable CRS to curity) interest, or irrevocable authority are in the securitisation group — three fund in the Australian market. This to perfect a first priority ownership or vice presidents, two assistant vice funding flexibility will enable CRS to security interest, in accordance with presidents, and two analysts. offer the most advantageous pricing to its the requirements of the local law in the customers while providing them with country of the seller. Receivables Quality greater market diversification. The sellers The program’s high-quality assets con- will sell receivables to CRS, which will The liquidity banks, dealers, and sist of trade and term receivables, as then be used as collateral for intercom- CCMAL have agreed not to take action well as asset-backed securities. Each

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Special Obligor Limits stringent credit and investment policy (A$ Mil.) and frequent monitoring. Obligor Rating* Aggregate Net Amount Limit ‘AA–’ A$100 million plus one-half of the related pool loss reserve Credit and Investment Policy ’A’ One-half of the related pool loss reserve Because of CCMAL’s strong nine-year track record (and its support by CNAI *Not below. in New York) for administering programs, Fitch IBCA views it like a specialised finance company, and reviews receivables purchase contains enhance- A larger pool may be permitted if the sellers each month on a post-closing ment and structural features, such as seller and transaction structure are ac- basis. Potential receivables sellers are overcollateralisation, direct recourse to ceptable to Fitch IBCA. subject to a rigorous credit review by sellers, guarantees, or other forms of loss CCMAL and CRS. This includes a re- protection, that would result in an invest- If an investment-grade seller is down- view of: ment-grade rating if each purchase stood graded to below investment grade, ➢ Seller viability. on its own. All transactions will be fully CRS will typically cease purchasing as- ➢ Credit analysis on company and in- hedged. CCMAL, as operating agent, is sets from that seller, and each asset pool dustry. responsible for structuring and monitor- purchased from that seller will be ➢ Specific analysis of seller’s credit ing each asset purchase. placed in liquidation. Asset pools from policies, monitoring procedures, credit such sellers will be divested if either: extension trends, collection policies, Each receivables pool purchase must a) the seller’s rating falls below ‘BBB–’ and management experience. meet CRS’s credit and investment pol- and the expected liquidation of the ➢ Systems reporting capabilities, in- icy guidelines, which set criteria for pool is greater than six months; or b) the cluding aging of portfolio. seller ratings and obligor diversity. seller’s rating falls below ‘BB–’. ➢ Credit analysis of large obligors be- While the credit and policy guidelines set fore approving special obligor con- the minimum acceptable quality level, In the case of asset pools whose initial centrations. most pools exceed these standards. acquisition was from below-investment-grade sellers, the pool would be In addition, CCMAL monitors receiv- divested if it falls below investment- Sellers ables collection trends and losses to liq- CRS can purchase receivables from grade quality as determined by the op- uidations. Prior to a credit decision on a companies with long-term debt rated erating agent and the rating agencies. new receivables purchase by CRS, ‘BBB–’ or ‘F3’ or from unrated compa- CCMAL will conduct an on-site audit nies, as long as the asset purchase is Obligors of the prospective seller. The auditor structured so that there is no adverse Based on a review of obligor distribu- analyses, among other things, credit and effect on CRS’s rating. Sellers may be tion, and in conjunction with estab- collection policies, dilutions to deter- located outside Australia, as long as the lishing loss reserves, CRS sets an mine potential receivables deductions, country has a foreign currency rating of at obligor limit for each individual asset and the seller’s ability to comply with least investment grade. Receivables can pool. Generally, each asset pool will have CRS’s reporting requirements. CCMAL be purchased from unrated companies no fewer than 15 unaffiliated obligors. On negotiates all agreements with sellers in that are evaluated by CRS using Citi- an exception basis, higher obligor limits accordance with CRS’s policies, and cer- corp’s debt rating model and deemed to may be set for selected special obligors, tain safeguards are customary. CCMAL be at least ‘BBB–’. Fitch IBCA believes which are subject to an annual credit obtains several rights from sellers: that the use of Citicorp’s debt rating analysis. Additionally, a monthly review ➢ CRS purchases receivables on an model ensures high-quality sellers. of special obligor exposure is conducted offering basis. As a result, if a receiv- on the individual asset pool level and on ables portfolio deteriorates or the CRS may also purchase ‘AAA’ rated an aggregate, programwide level. At seller’s financial performance weak- bonds that are wrapped. Maximum in- any time, an obligor may be removed ens, CRS has no obligation to con- vestments in receivables pools shall be from the special obligor list. Fitch tinue purchasing receivables. governed by the following limits: IBCA believes that the credit quality of ➢ CRS receives the right to take con- ➢ Pools acquired from sellers rated at the special obligors is well diversified trol of the asset collection process least ‘A–’ — $250 million and should remain stable due to CRS’s and notify obligors of such change. ➢ Other — $150 million

Fitch IBCA, Inc. 3 Corporate Australasian Securitisation Transactions Pty Ltd.

➢ CRS has power of attorney over pools have been very low. In the event CRS’s rating due to the purchase of such seller bank accounts. of losses, two layers of credit enhance- a pool, the loss reserve may be lower than ➢ CCMAL receives monthly reports ment are in place. the formula listed above. from sellers with information on receivables performance and obligor Required Reserves Programwide Credit exposure, including any special ob- Pool-specific required reserves form Enhancement ligor limits. the first layer of loss protection. Each After pool-specific reserves are ex- reserve is set at a level designed to hausted, there is a fungible credit en- cover a significant level of losses that hancement equal to 10% of program Other Citicorp Programs Rated could be incurred by the pool in the outstandings. This loss protection is in by Fitch IBCA event of its liquidation. The reserves the form of an irrevocable and uncondi- Name Size Rating are largely provided through overcollat- tional guaranty from UBS. Fitch IBCA CAFCO US$10 billion ’F1+’ eralisation, though other forms of en- rates UBS ‘AAA/F1+’. Bonds rated ‘AAA’ CIESCO US$10 billion ’F1+’ hancement may be employed, including and benefiting from a wrap would not be CRC US$10 billion ’F1+’ direct recourse, cash collateral, spread subject to this requirement. WCP US$7 billion ’F1+’ accounts, and third-party guarantees. Sellers providing recourse must be rated Liquidity Support at least ‘A–’ or the equivalent. Gener- CRS will maintain liquidity from di- Liability and Liquidity ally, the loss reserve is at least equal to verse sources to supplement the inher- Management the greater of: ent liquidity of the receivables pools. CCMAL manages business so that the ➢ 3.0 times (x) historical losses to liqui- Committed liquidity coverage will be average maturity of commercial paper dations. maintained at a minimum of 100% in will approximate the average maturity ➢ 3.0x the obligor concentration limit the form of revolving credit facilities. of the receivables purchased by CRS. (special obligors are not subject to Third-party liquidity sources must be CCMAL will also attempt to stagger the 3.0x obligor concentration limit). rated ‘F1+’. Currently, Citibank (70%) maturities; this will depend on the un- ➢ 5% of the asset pool. and UBS (30%) serve as liquidity banks. derlying assets that are purchased. While the reserve is typically set ac- If an event of default occurs under the Loss Protection cording to this formula, exceptions may liquidity agreement, the commercial pa- CRS is managed to a conservative low be made. If a transaction is structured per would become due and payable im- loss level. Historically, losses within so that there is no adverse effect on mediately or upon demand to the agent

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Staff performing reporting functions are responsible for internal reporting within Citicorp, external reporting to rating agencies and investors, control of original documents, and receipt of seller reports.

Accounting CCMAL employs experienced and knowledgeable personnel responsible for accounting functions. The accounting staff is responsible for monthly gen- eral ledgers, billing operations, financial statement preparation, communication (Citisecurities), and the liquidity provid- tiating liquidity facility agreements and with external auditors, and fee analysis. ers’ obligations terminate. Events of any enhancements, and authorising is- default include: suance of commercial paper. Administration ➢ Nonpayment of interest or princi- The administration group is responsible pal within three business days of CCMAL consists of four groups that for the day-to-day operations of the pro- due date. work together on every deal — opera- gram, as well as overseeing deal structures ➢ Breach of representations or war- tions; accounting, legal, and tax; transac- and modifications, funding, settlements, ranties. tors; and deal administration. Additionally, cash monitoring, monthly deal accruals, ➢ Insolvency event occurs with re- CCMAL may utilise external auditing and customer service. Additionally, the spect to CRS. firms to audit sellers. group is responsible for making sure that ➢ Change to documents without con- sellers do not exceed their purchase lim- sent of Fitch IBCA or related parties. Operations its. The deal administration teams are ➢ Reduction in credit enhancement The operations group is responsible for increasing the use of technology to assist below 10% of outstanding commer- two functions. Staff responsible for in- with their functions. cial paper. formation technology support the internal deal-tracking computer system, Seller Audits Operating Agent interface with a data centre, interface CCMAL conducts audits on all sellers As operating agent, CCMAL is respon- with the global office, and support the annually. The scope of the seller audit sible for qualifying prospective transac- accounting system. CCMAL has an off- depends on the seasoning of the deal tions, structuring receivables purchases site backup and disaster recovery sys- and the rating of the seller. The audit- in accordance with CRS’s credit and tem that is tested frequently and that ing process is crucial to CCMAL’s abil- investment policy, monitoring perform- can be relied on should CCMAL’s com- ity to monitor the financial stability and ance of the purchased receivables, nego- puter system experience a shut down. health of all its sellers.

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Copyright © 1998 by Fitch IBCA, Inc., One State Street Plaza, NY, NY 10004 Telephone: New York, 1-800-753-4824, (212) 908-0500, Fax (212) 480-4435; Chicago, IL, 1-800-483-4824, (312) 214-3434, Fax (312) 214-3110; London, 011 44 171 638 3800, Fax 011 44 171 374 0103; San Francisco, CA, 1-800-953-4824, (415) 955-0529, Fax (415) 955-0549 Barbara A. Besen, Publisher; John Forde, Editor-in-Chief; Madeline O’Connell, Director, Subscriber Services; Jason H. Kantor, Manager, Publishing Technology; Nicholas T. Tresniowski, Senior Managing Editor; Diane Lupi, Managing Editor; Jennifer Hickey, Andrew Simpson, Editors; Jay Davis, Martin E. Guzman, Paula Sirard, Senior Publishing Specialists; Harvey Aronson, Publishing Specialist. Printed by American Direct Mail Co., Inc. NY, NY 10014. Reproduction in whole or in part prohibited except by permission. Fitch IBCA ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch IBCA believes to be reliable. Fitch IBCA does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch IBCA receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from $1,000 to $750,000 per issue. In certain cases, Fitch IBCA will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from $10,000 to $1,500,000. The assignment, publication, or dissemination of a rating by Fitch IBCA shall not constitute a consent by Fitch IBCA to use its name as an expert in connection with any registration statement filed under the federal securities laws. Due to the relative efficiency of electronic publishing and distribution, Fitch IBCA Research may be available to electronic subscribers up to three days earlier than print subscribers.

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