Fitch Affirms Amber Trust Two; Revises Outlook to Negative

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the rating for Amber Trust Two and revised the Rating Outlook as follows:

--JPY 6,055,000,000 credit-linked notes at 'BBB-sf'; Outlook to Negative from Stable.

KEY RATING DRIVERS

Fitch's rating of Amber Trust Two is credit-linked to the Issuer Default Rating (IDR) of Encana Corporation (Encana), the transaction's qualified investment, which is rated

'BBB-'/Negative Outlook by Fitch.

The notes' rating is delinked from the transaction's swap counterparty, Morgan Stanley (rated 'A/F1'/Stable Outlook).

RATING SENSITIVITIES

The rating remains sensitive to Fitch's rating of EnCana. A change in Fitch's rating of Encana would result in a change in the rating of the notes.

Amber Trust Two is a credit linked structure whereby the note holders obtained credit exposure to Encana via a cross-currency interest rate swap. The note holders have provided a loan of JPY 6,055,000,000 at a fixed rate of 4.28% to the issuer, the proceeds of which were used to purchase $50,000,000 of Encana's (CUSIP 292505AD6) 6.50% bond due Aug. 15, 2034. At each interest payment date or at maturity, the issuer will pass the corresponding interest or principal amount of the Encana bond in full to the swap counterparty, which then pays the issuer the JPY equivalent of that amount, using a fixed exchange rate.

Encana is permitted to exercise an early make-whole call on its bond. This exercise would cause an early termination event and could expose the Amber Trust Two notes to potential termination payments and currency exchange risk. However, use of this make-whole call provision remains highly unlikely, since such a call would cost Encana a premium of approximately 151% over current par value. Additionally, the exercise of the make-whole call provision on the qualified investment at the current premium would not result in a loss to the notes at current exchange rates. Fitch views the current probability of loss on the notes from the exercise of a make-whole call as sufficiently remote at the current rating level.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes (pub. 08 Mar 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878513

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001245

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001245

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160321005964/en/

Fitch Ratings
Primary Analyst
Shashi Srikantan
Director
+1-212-908-0393
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-0156
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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