OREANDA-NEWS. Fitch Ratings has assigned Signum Finance II plc's EUR28.5m Series 2016-2 credit-linked notes (CLN) due 2038 (ISIN XS1391723530) a 'BBB+sf' rating with a Stable Outlook.

KEY RATING DRIVERS
The rating addresses the repayment of the principal on the notes according to the terms and conditions of the documentation. The rating reflects the credit quality of two risk-presenting entities as well as the issuer's legal and financial structure. The two risk-presenting entities are Goldman Sachs International (GSI; A/Positive/F1) and Standard Chartered PLC (Standard Chartered; A+/Negative/F1).

At closing, the proceeds from the notes' issuance were used to purchase a 4.375% coupon Standard Chartered plc non-callable bond (ISIN XS0876756452) and to enter into an asset swap with GSI. The swap counterparty will rank senior to the noteholders in all circumstances. The issuer will pay the swap counterparty all interest and principal received on the bonds and the swap counterparty will pay the interest and principal amount to the issuer, which in turn will pay the interest and principal amount to the noteholders.

The swap counterparty will pay an annual fixed 5.22% coupon payment to the issuer, which in turn will pay the investors from the issue date up to and including the 2021 payment date. After this date, the investors will receive a leveraged variable coupon, 2.405 times the 30-year EUR swap rate. However should the 30-year EUR swap rate be higher than or equal to 5.0%, or should the 30-year EUR swap rate less the two-year EUR swap rate be less than or equal to 0.25%, the coupon would drop to 0%. The rating does not address the volatility of the note coupon. Provided that no credit events (including default or restructuring) have been declared on the Standard Chartered bond, the note coupon will be paid by GSI.

The noteholders have a put option that they can exercise at any point until the notes' maturity date, with 20 business days' notice. If the put option is exercised, the noteholders will receive the proceeds from the sale of the Standard Chartered bond less all expenses plus swap termination payments payable to the issuer (or less swap termination payments if payable by the issuer).

The notes are issued by Signum Finance II Plc, a repackaging note programme arranged by GSI with limited liability and incorporated under Irish law. Non-petition language included in the master programme warrants that no party to any series will be able to petition for the winding-up of the issuer as a consequence of the default of any particular series. In addition, limited recourse clauses in the programme restrict the noteholder of a given series to only have recourse to the collateral assigned to this series.}

RATING SENSITIVITIES
Fitch will monitor the performance of the underlying risk-presenting entities and adjust the rating of the transaction accordingly. Fitch tested the impact of a one-notch downgrade of the weakest entity (GSI) and this would lead to a downgrade of the notes by one notch.

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