CiMA Finance DAC notes affirmation reflects stable structured credit profile

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CiMA Finance DAC notes affirmation

Highlights

Fitch Ratings affirms CiMA Finance DAC Series 2021-2 tranche A, B, and D credit-linked notes at 'A-sf', reflecting stable credit quality linked to St. James's Place guarantees.
Counterparty exposures are managed by requiring counterparties to maintain at least 'BBB' ratings, with mandatory replacement or support if ratings fall below thresholds and a 14-day collateral posting for derivatives.
Notes ratings capped at the lowest of Banco Santander's relevant 'A' level ratings due to concentrated counterparty risk, and a downgrade of St. James's Place would trigger a similar downgrade on the notes.

Rating affirmation and transaction structure

As reported by Fitch Ratings, the agency affirms CiMA Finance DAC Series 2021-2's tranche A, tranche B and tranche D credit-linked notes at 'A-sf', with the ratings addressing the timely payment of interest and principal under the notes' terms.

The transaction repackages loan facilities originated by Banco Santander, S.A., London Branch that are fully, unconditionally and irrevocably guaranteed by St. James's Place Plc and St. James's Place Partnership Services Limited. CiMA Finance DAC operates as an Ireland-incorporated special purpose vehicle for issuing repacked debt obligations under a programme arranged by Banco Santander, which also pays all fees under the CiMA programme.

Fitch says the rating is primarily linked to the credit quality of St. James's Place as guarantor of the charged assets, with a one-notch deduction from SJP's rating under its insurance holding company criteria. For tranche B, the charged assets comprise 64 loan facilities, while tranche D is backed by 14 loan facilities granted to SJP agents or partners and jointly guaranteed by SJP and SJPPSL.

Counterparty protections and rating constraints

Fitch says Banco Santander's roles in the structure, including transaction account bank, derivative provider, collection account bank, servicer and programme sponsor, are sufficiently de-linked from transaction performance because the documents require minimum counterparty ratings and remedial action if those thresholds are breached.

Under the documents, relevant counterparties must hold at least a 'BBB' long-term deposit rating, Derivative Counterparty Rating or long-term issuer default rating, as applicable. If a counterparty falls below the threshold, it must be replaced or supported by an eligible guarantor within 60 calendar days, while the derivative provider also faces a 14-day collateral posting remedy.

The agency also points to a pre-funding trigger requiring all remaining programme fees due until 2039 to be pre-funded if the programme sponsor falls below the 'BBB' eligibility level. Even so, Fitch says the notes cannot be rated above the lowest of Banco Santander's long-term deposit rating of 'A', derivative counterparty rating of 'A' and long-term issuer default rating of 'A-' because of concentrated counterparty exposure in a jump-to-default scenario before remedies take effect.

Fitch adds that the notes benefit from a 25-calendar-day grace period before non-payment becomes an event of default, alongside a six-day gap between loan facility and note payment dates. The agency says a downgrade of St. James's Place would likely lead to similar action on the notes, while any upgrade would remain subject to the Banco Santander-related rating cap.

Our earlier coverage of Fitch’s assessment of Hainan Rubber’s proposed subordinated perpetual sustainable securities explained how the agency rated the notes two notches below the issuer due to their subordinated ranking and the issuer’s ability to defer coupons. That article also outlined Fitch’s rationale around parent support, the group’s leverage and liquidity profile, and how these factors shaped the refinancing plan for offshore debt.

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