The Liberty Hampshire Co. is preparing to launch the Valcour Bay Capital Co., an asset-backed commercial paper vehicle that can issue U.S. dollar-denominated CP, callable notes, and extendible notes to buy trade receivables and other financial assets.
Valcour Bay Capital's structural features are similar to Breeds Hill Capital Ltd., a Cayman Island company established last September. Callable notes issued from Valcour Bay Capital will have final maturities of up to 397 days from issuance, with at least one opportunity to repay the notes before they mature. If the conduit issues extendible notes, then their final maturities will be dated 397 days after the date of issuance. If proceeds from the collateral account and issuance from new notes fall short of the amount needed to repay extendible notes, then all extendible notes with the same maturity date will be extended to a final maturity date 397 days from issuance. Meanwhile, the notes will offer a rate of one-month Libor plus 25 basis points.
All notes, extendible or otherwise, must be supported by a liquidity facility from which obligations can be drawn in the same currency as outstanding notes, and they must be sized to cover the face amount of outstanding notes. Each Valcour transaction will be supported by its own liquidity agreement sized at 100% of the related transaction amount and provided by top-rated banks and financial institutions, Fitch Ratings said. The rating agency, with that in mind, plus other considerations, gave the program an F1' rating. Moody's Investors Service gave Valcour a P-1 rating, on the strength of Valcour's liquidity support agreements.
These agreements will ensure the full and timely repayment of the notes, and serve to shore up Valcour Bay Capital's credit profile. If the agreements fall short of covering the ABCP conduit's outstanding liabilities, then the program will stop issuing notes. Liberty Hampshire has been operating ABCP programs since 1996 and currently operates about nine other programs.
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