Goldman Sachs is marketing a transaction that has some of the features of a covered bond and some of the features of a securitization.

The €10 billion program, FIGSCO, is collateralized by all kinds of securities, possibly including senior unsecured corporate debt and asset-backed securities, as opposed to just mortgages. In addition to a claim on the assets, investors will also benefit from a senior unsecured claim first on Goldman and then on Mitsui Sumitomo Insurance Group —"triple recourse," according to Standard & Poor's.

The trust will initially issue €1 billion of fixed-rate, seven-year securities that S&P expects to rate 'AAA.' 

Goldman Sachs can add or remove the collateral assets on an ongoing basis, subject to certain portfolio profile tests.  The collateral assets can be denominated in any currency. “These assets may represent an obligation of one or more obligors in any jurisdiction and which have a stated maturity before or after the final maturity of the series 2014-01 notes,” according to the S&P presale report.

The issuer is required to maintain certain asset coverage tests for the collateral. Depending on the asset, the issuer will be required to satisfy a minimum overcollateralization percentage (ranging between 102% and 115%) of the value of the collateral asset.

“If the value of any individual collateral falls below the initial price of the asset, the market value of all of the collateral assets falls below 105% of the principal amount outstanding of the notes, or if the income expected to be received by the issuer falls below interest due on the notes, the TRS counterparty, Goldman Sachs Mitsui Marine Derivative Products, will post the shortfall,” explained analysts in the presale.

S&P said that it did not give any credit to the underlying collateral in its rating analysis of the series 2014-01 notes. Instead the rating relies solely on the obligation of the TRS counterparty “to make interest payments and any shortfall in principal payments on the notes under the TRS agreement.”

 

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