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Chesham Finance Limited / Chesham Finance LLC - Series VIII -- Moody's assigns a definitive rating of Prime-1 (sf) to commercial paper issued by Chesham Finance Limited/Chesham Finance LLC -- Series VIII

·15 min read

Rating Action: Moody's assigns a definitive rating of Prime-1 (sf) to commercial paper issued by Chesham Finance Limited/Chesham Finance LLC -- Series VIIIGlobal Credit Research - 02 Mar 2022London, 02 March 2022 -- Moody's Investors Service ("Moody's") announced that it has assigned the following definitive ratings to commercial paper ("CP") issued by Chesham Finance Limited as issuer and Chesham Finance LLC as co-issuer (together "Chesham" or the "Issuers") under a new series, Series VIII ("Chesham-Series VIII"):....US Commercial Paper Program, Assigned P-1 (sf)....Euro Commercial Paper Program, Assigned P-1 (sf)RATINGS RATIONALEChesham - Series VIII CP is segregated from the CP of Chesham ("core CP") and all other segregated series of CP which may be issued from time to time. The issuance proceeds of Chesham - Series VIII are used to acquire assets which are solely used as collateral for Chesham - Series VIII CP and to which no investors in other securities issued by Chesham will have recourse. Similarly Chesham - Series VIII noteholders will have no recourse to any of the assets which form collateral for other Chesham CP. Segregation is by way of security, limited recourse / non-petition provisions, separate custodial and bank accounts and operational procedures which apply to all classes of CP issued by Chesham.Similar to Chesham core CP and the other series, the Prime-1 (sf) rating of Chesham - Series VIII is based on the credit and liquidity support provided by a total return swaps / repurchase agreement / securities lending agreement / deposit to be entered into with counterparties, rated Prime-1 initially, and on the strict limits and robust procedures under which the programme will operate.USE OF REPURCHASE, DEPOSIT AND SECURITIES LENDING AGREEMENTS TO ACHIEVE MATCH FUNDING - GENERALLY NO LIQUIDITY FACILITIESThe collateral for Chesham - Series VIII is expected to be comprised of fixed or floating rate instruments including but not limited to commercial paper, certificates of deposit, time deposits, banker's acceptances, asset-backed securities, freely transferable promissory notes, government or corporate bonds, debentures, equities, commodities, loans, loan participations, repurchase and reverse repurchase agreements, asset-backed commercial paper, contracts or Hedge Agreements, or any instrument of financial value.In relation to Series VIII Chesham may, in conjunction with the financing of each asset, enter into a repurchase agreement ("Repo") or a securities lending agreement ("Loan") under which the counterparties will be obliged to make a payment on or before the maturity date of the related CP or on demand, in an amount at least equal to the face amount of maturing CP. Chesham - Series VIII will not generally require any liquidity facilities due to the matched maturity profiles of its assets and liabilities.Chesham - Series VIII will have one Prime-1 rated counterparty in relation to its Repos, Loans, deposits and hedging and liquidity agreements. The ratings of Chesham - Series VIII is therefore directly linked to that of the counterparty to which it is exposed. Unlike in relation to the Chesham core CP, instead of being removed as a counterparty on downgrade, the credit exposure will remain until maturity.DAILY NCO, AND SENSITIVITY TESTS TO ENSURE CP CAN BE REPAID ON MATURITYThe Bank of New York Mellon will test the Chesham - Series VIII portfolio daily and prior to each issuance of Series VIII CP or asset purchase to ensure that the issuer will be able to be repay the CP on its maturity date. CP cannot be issued unless Chesham, in respect of Series VIII, will remain in compliance with these respective tests. Exceeding the permitted limits is a stop-issuance event in the respective series of CP. The following tests will be run for the series:- The net cumulative cash outflow ("NCO") must not be greater than zero. The NCO is computed as the worst case possible net outflow corresponding to the amount of cash and proceeds from maturing asset/s in the portfolio, reduced by the amounts payable on maturing CP. This test will be conducted on every business day until the final maturity of the respective CP;- Sensitivity to changes in interest rates; and- Sensitivity to changes in currency exchange rates.ORIGINATION AND ADMINISTRATIONBSN's principal responsibilities as Investment Advisor are to originate and structure transactions, identify securities to be financed and the associated Repo, Loan or deposit to be entered into, provide day-to-day advice, on request, in relation to conduit administration of Chesham - Series VIII and arrange and structure any necessary hedging or liquidity agreements.As is currently the case for the Chesham programme, The Bank of New York Mellon, London Branch will act as Security Trustee, custodian and issuing and paying agent. It will also provide cash administration and act as account bank. The Bank of New York Mellon is the administrator of the Chesham programme and their role is extended to administration in respect of Chesham - Series VIII.The principal methodology used in these ratings was "Moody's Approach to Rating Asset-Backed Commercial Paper" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1231930. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors that would lead to a downgrade of the ratings:The Prime-1 (sf) ratings of commercial paper issued by Chesham - Series VIII is linked to the Prime-1 counterparty risk assessment of the Counterparty, in that a downgrade of this counterparty could result in a downgrade of the associated CP.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Moody's did not use any models, or loss or cash flow analysis, in its analysis.Moody's did not use any stress scenario simulations in its analysis.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. William Ma Vice President - Senior Analyst Structured Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 George Zittis VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. 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