Fitch Revises Outlook for Emblem Finance Company No. 2; Affirms Rtg

Fitch Ratings affirms its rating and revises its Rating Outlook for Emblem Finance Company No. 2 (Emblem Finance):

--CLP 5,082,000,000 credit-linked notes at 'BBsf'; Outlook to Negative from Stable.

KEY RATING DRIVERS

The rating action follows Fitch's revision of the Outlook for the reference entity, Votorantim Participacoes S.A. (VPAR). Fitch monitors the performance of the underlying risk-presenting entities and adjusts the rating accordingly through application of its current credit-linked note (CLN) criteria, 'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' dated Feb. 21, 2013.

The rating considers the credit quality of VPAR's current Issuer Default Rating (IDR) of 'BB' with a Negative Outlook, JPMorgan Chase & Co. as swap counterparty (rated 'A+', Outlook Stable), and HSBC Holdings Plc subordinated notes (CUSIP US404280AF65, rated 'A+'). The Rating Outlook reflects the Outlook on the main risk driver, VPAR, which is the lowest-rated risk-presenting entity.

RATING SENSITIVITIES

The rating remains sensitive to rating migration of each risk-presenting entity. A downgrade of VPAR would likely result in a downgrade to the notes.

Emblem No. 2 is a single-name CLN transaction designed to provide credit protection on the VPAR with a reference amount of CLP5,082,000,000 (USD10 million). This protection is arranged through a credit default swap (CDS) between the issuer and the swap counterparty, JPMorgan Chase & Co. Proceeds from the issuance of the notes were used to purchase USD10 million HSBC Holdings Plc subordinated notes as a collateral asset for the CDS. The notes are rated to the payment of interest and principal per the transaction documents. All payments are made in USD amounts adjusted according to both the value of the Undidad de Fomento (UF) and the CLP/USD exchange rate as outlined in the transaction documents.

Additional information is available at 'www.fitchratings.com'.

The information used to assess this rating was sourced from the swap counterparty and the public domain.

Applicable Criteria & Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013)

--'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' (Feb. 21, 2013)

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701709

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=804837

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Fitch Ratings
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