Structural Enhancements
02 Aprile 2003 - 9:00AM
UK Regulatory
RNS Number:5007J
Beta Finance Corporation
02 April 2003
NOTICE ON BEHALF OF
BETA FINANCE CORPORATION AND BETA FINANCE INCORPORATED
Beta Finance Corporation and Beta Finance Incorporated request that you forward
this notice to, and for the information of, the beneficial holders of the Euro
Commercial Paper and Euro Medium Term Notes issued by Beta Finance Corporation
or the US Commercial Paper and US Medium Term Notes issued by Beta Finance
Incorporated (collectively the "Senior Debt"):
1. INTRODUCTION
This notice describes a proposal to enhance the structure of Beta Finance
Corporation ("Beta"), to allow it to benefit from advancements in
technology in structured investment vehicles. As a result of this proposal,
the structure of Beta will closely mirror that of other investment vehicles
also managed by Citibank International plc, such as Centauri Corporation
and Dorada Corporation.
There is no requirement for holders of existing Senior Debt to take any
action in relation to these structural enhancements. This notice is
provided for information purposes only.
This notice has been prepared by Citibank International plc in its capacity
as Investment Manager and as agent of Beta in connection with the revisions
outlined below. The purpose of this notice is to set out for the holders
of existing Senior Debt the key elements of the revised Beta structure, and
is not intended to be an exhaustive summary of the revised structure. The
changes will become effective on 2 May 2003 or such later date as is
notified to the dealers on the Senior Debt programmes (the "Effective
Date").
PROPOSED STRUCTURE
1.1 Senior Debt Investor Protection
Security for senior debt investors is provided by a first charge over
Beta's assets, with The Law Debenture Trust Corporation acting as Security
Trustee.
The earnings of the company provide the first level of protection for
senior debt investors in the event of any credit losses. Further
overcollateralisation is provided by the company's capital, which at 2
April 2003 was US$1 billion.
After the Effective Date, structural protection for senior investors will
be provided by the following early wind-down process, triggered by, inter
alia, changes to the ratings of Beta's senior debt programmes:
(a) Downgraded to Double-A. Beta will continue to operate under
restrictive operating policies pre-agreed with Moody's, Standard &
Poor's and Fitch (collectively the "Rating Agencies"). These policies
are designed to reduce risk in the portfolio and thereby assist Beta
in regaining the Triple-A senior ratings as soon as practicable.
Beta - 2 April 2003
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(b) Downgraded to Single-A. Defeasance is triggered bringing about an orderly
wind-down of Beta's portfolio. Liabilities are repaid as they fall due
from the proceeds raised from sales in the asset portfolio. No further
debt issuance may occur and there will be no further distributions to the
capital investors until all senior debt is repaid. This process is carried
out by Citibank International plc in its capacity as the Defeasance
Manager.
(c) Ratings deteriorate further to below Investment Grade. The vehicle enters
Enforcement and the security is enforced by the Security Trustee.
1.2 Defeasance and Enforcement Process
In the process of unwinding the portfolio, assets in the existing portfolio
shall be sold to repay liabilities as they fall due.
1.3 Capital Adequacy
The continuing ability of Beta to meet its financial obligations to the
AAA/Aaa/ AAA and A-1+/P-1/F1+ standards is demonstrated by regular tests of
its capital adequacy. After the Effective Date, proprietary simulation
technology will be used to ensure capital adequacy. This is achieved by
analysing the ability of Beta to repay its senior debt obligations to the
triple-A standard in a variety of stressed scenarios.
After the Effective Date, leverage will be limited by the Rating Agencies
to 25 times. However Beta's debt ceiling will remain at $15 billion. For
as long as Beta's outstanding capital totals $1 billion, Beta's leverage
will therefore continue to be limited to 15 times.
1.4 A-1/P-1/F1 Liquidity Providers
In accordance with criteria agreed with the Rating Agencies, A-1/P-1/F1
rated financial institutions will be eligible to provide liquidity.
2. MECHANISM TO EFFECT THE ENHANCEMENTS
In order to effect the enhancements, approval of changes to the
documentation has been provided by the Security Trustee, Rating Agencies
and Liquidity Banks.
The Rating Agencies have confirmed that the changes to the documentation
will not affect the Triple A ratings of the Senior Debt programmes or the
existing Senior Debt.
This Notice is directed only at holders of the Senior Debt. Any other
person should not rely on it.
After the Effective Date for further information, please contact the
dealers on the Senior Debt programmes for the Information Memorandum or the
Private Placement Memorandum in relation to the Senior Debt, as
appropriate.
Beta - 2 April 2003
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This information is provided by RNS
The company news service from the London Stock Exchange
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