- THIS
NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF THE
REGISTERED AND BENEFICIAL OWNERS OF THE NOTES. ALL DEPOSITARIES,
CUSTODIANS AND OTHER INTERMEDIARIES RECEIVING THIS NOTICE ARE
REQUESTED TO PASS THIS NOTICE TO THE BENEFICIAL OWNERS IN A TIMELY
MANNER. IF NOTEHOLDERS ARE IN ANY DOUBT AS TO THE ACTION THEY
SHOULD TAKE, THEY SHOULD CONSULT THEIR OWN INDEPENDENT PROFESSIONAL
ADVISERS AUTHORISED UNDER THE FINANCIAL SERVICES AND MARKETS ACT
2000 (IF THEY ARE IN THE UNITED
KINGDOM) OR ANOTHER APPROPRIATELY AUTHORISED INDEPENDENT
FINANCIAL ADVISER AND TAKE SUCH OTHER ADVICE FROM THEIR OWN
PROFESSIONAL ADVISERS AS THEY DEEM NECESSARY, IMMEDIATELY.
IMPORTANT NOTICE
TO THE HOLDERS OF THE
£305,200,000 Class
A Mortgage Backed Floating Rate Notes due 2042 (with Detachable A
Coupons) (the "Class A Notes") (Reg S ISIN XS0190203124)
£21,000,000 Class
B Mortgage Backed Floating Rate Notes due 2042 (the "Class B
Notes") (Reg S ISIN XS0190204445)
£11,550,000 Class
C Mortgage Backed Floating Rate Notes due 2042 (the "Class C
Notes") (Reg S ISIN XS0190205178)
£8,750,000 Class D
Mortgage Backed Floating Rate Notes due 2042 (the "Class D Notes")
(Reg S ISIN XS0190205681)
£3,500,000 Class E
Mortgage Backed Floating Rate Notes due 2042 (the "Class E Notes")
(Reg S ISIN XS0190206143)
issued by
Southern Pacific
Financing 04-A PLC
(the "Issuer")
on or about
26 April 2004
The Class A Notes, Class B Notes, Class C Notes, Class D Notes
and Class E Notes are together referred to as the
"Notes".
Capitalised terms in this Notice shall, except where the context
otherwise requires or save where otherwise defined herein, bear the
meanings ascribed to them in the master definitions schedule dated
26 April 2004 between, amongst
others, the Issuer and Capita Trust Company Limited (the
“Trustee”) (as amended and restated from time to time) (the
"Master Definitions Schedule").
On 9 June 2015 the short term
unsecured debt rating of Barclays Bank PLC ("Barclays") was
downgraded by S&P from "A-1" to "A-2" (the "S&P
Downgrade"). Barclays is the GIC Provider, the Account Bank and
the Collection Account Bank for the Transaction.
Prior to the S&P Downgrade, Barclays did not have the
relevant requisite ratings set out in the relevant transaction
documents, including the Bank Agreement, the Cash/Bond
Administration Agreement or the GIC (the “Relevant
Documents”), but did have the relevant requisite ratings
required by the current S&P counterparty criteria to act as the
Account Bank, GIC Provider and Collection Account Bank, and
therefore the Transaction Parties were in the process of agreeing
amendments to the Relevant Documents to amend the rating
requirements to be in line with such criteria. However, as a result
of the S&P Downgrade, Barclays no longer has the relevant
requisite ratings set out in the relevant transaction documents,
including the Relevant Documents, or the relevant requisite ratings
required by the current S&P counterparty criteria to act as the
Account Bank and GIC Provider (Barclays does continue to have the
requisite rating required by the current S&P counterparty
criteria to act as the Collection Account Bank). The Issuer, the
Cash/Bond Administrator and/or Barclays, as applicable, are
required to take certain remedial action following the S&P
Downgrade, as set out in the Relevant Documents.
The Issuer would like to provide an update on the status of the
remedial actions which have been, and which are being, taken by the
Issuer and/or the Cash/Bond Administrator (acting on behalf of the
Issuer) in connection with the S&P Downgrade. The Issuer,
having been informed of the facts herein by the Cash/Bond
Administrator (and not having independently verified the
information contained in this notice), hereby notifies Noteholders
of the following:
1.
Background to the remedial action
1.1 Following the
S&P Downgrade, the Cash/Bond Administrator, on behalf of the
Issuer and in its capacity as the Cash/Bond Administrator,
undertook a market review and entered into discussions with five
financial institutions that met the Rating Agencies’ minimum
counterparty criteria to perform the relevant roles to ascertain
whether one of them would be suitable to be appointed as
replacement Account Bank, GIC Provider or the Collection Account
Bank (as applicable).
2.
Update on the remedial action in relation to the GIC and the
Transaction Account
Following the completion by the Cash/Bond Administrator of its
market review to find a suitable replacement, the Cash/Bond
Administrator notified the Issuer and the Trustee that it has
identified a global banking institution as a potential suitable
replacement to replace Barclays as the GIC Provider and the Account
Bank for the GIC Account and the Transaction Account (the
"Transaction Account Bank"). The specific terms for the
appointment are currently still being discussed between the
Cash/Bond Administrator, the Issuer and the prospective replacement
bank; however in the expectation that commercial agreement will be
reached, it is intended that the appointment will be finalised as
soon as practicable. The Cash/Bond Administrator and the Issuer are
seeking to keep the commercial and legal terms as consistent as
possible to those terms currently in place with Barclays, but it
should be noted that there may be differences required to reflect
commercial and legal changes that have taken place in the market
since the original bank agreement was entered into with Barclays,
in particular it being noted that some differences are required to
be implemented (resulting in potentially lower interest rates to
take into account increased regulatory costs) as a result of the
implementation of such changes, the finalisation of these necessary
changes has unfortunately led to a delay to execution of the
relevant legal documentation whilst the impact of such changes are
being confirmed and finalised.
3.
Update on the remedial action in relation to the Collection
Accounts
3.1 Despite having
conducted its market review and having had discussions with
financial institutions, the Cash/Bond Administrator has not been
able to find a suitably rated financial institution who is willing
to be the replacement account bank for the Collection Accounts (the
"Collection Account Bank"). In relation to the
suitably rated financial institutions that were able to offer
collection account services, most were deterred by the significant
efforts involved in setting up collection account banking
operations, together with the economics of operating such accounts.
The financial institutions were also concerned with the potential
risks, such as direct debit indemnity liability, involved in
operating collection accounts in transactions of this type and at
this stage of maturity.
3.2 As a result, the
Cash/Bond Administrator has advised the Issuer that there is
currently no viable alternative but to retain Barclays in the role
of Collection Account Bank and to lower the rating requirements of
the Collection Account Bank in the Relevant Documents to match
Barclays' current rating. The Cash/Bond Administrator understands
that this approach may be possible on the basis that Barclays
currently meets each Rating Agency’s published minimum counterparty
rating criteria for the Collection Account Bank role and is
therefore able to continue to support a transaction with a "AAA"
rated note.
3.3 Barclays have
communicated to the Cash/Bond Administrator that they are prepared
to remain in their Collection Account Bank role provided that they
are able to amend their fee structure. They have asked that
the current tariffs, which are based largely on numbers of items
processed, are replaced with a fixed fee structure (including an
annual charge), and if such changes are agreed and implemented,
this will result in higher Collection Account Bank
charges.
3.4 Barclays considers
that these increased fees are necessary to offset the risks of
operating the Collection Accounts, against the economics of
performing the Transaction Account Bank and GIC Provider roles. The
Trustee is not required to consent to the increase in fees charged
by Barclays as the Transaction Documents already allow for the
increase to be implemented.
3.5 Barclays have
communicated to the Cash/Bond Administrator that they will require
that it remains as a Secured Creditor under the Deed of Charge in
its capacity as the Collection Account Bank and therefore rank in
the relevant Priority of Payments at the same level as it does as
the existing Account Bank. The New Transaction Account Bank
(when selected) will accede to the Deed of Charge to become a
Secured Creditor and to also rank at the same level as Barclays
currently does in its capacity as Account Bank.
4. Except
to the extent the Trustee’s consent is required under the
Transaction Documents to implement the replacement of Barclays as
Account Bank and GIC Provider and to retain Barclays as Collection
Account as a result of the S&P Downgrade, in accordance with
normal practice, the Trustee expresses no opinion as to the merits
of the steps taken by the Cash/Bond Administrator or the Issuer (as
applicable) as described in this Notice. It has, however,
authorised it to be stated that, on the basis of the information
set out in this Notice, it has no objection to the Notice being
sent to the Noteholders. The Trustee has, however, not been
involved in preparing this Notice and makes no representation that
all relevant information has been disclosed to Noteholders in this
Notice.
The Issuer will keep the Noteholders updated on developments in
respect to the proposed remedial actions.
Queries may be addressed to the Issuer as follows:
SOUTHERN PACIFIC FINANCING 04-A PLC
4th Floor
40 Dukes Place
London EC3A 7NH
Attention: The
Directors
Telephone: +44 203 367
8200
Fax: +44
203 170 0246
e-mail:
spvservices@capitafiduciary.co.uk
Ref:
SOUTHERN PACIFIC FINANCING 04-A PLC
This notice is given by the Issuer.
Dated 4 February 2016