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ScandiNotes® IV

ScandiNotes® IV is a static true sale Collateralized Loan Obligation (CLO), i.e. a note issued on the basis of and guaranteed by the underlying loans – the same principle as that behind mortgage notes. The underlying loans in ScandiNotes® IV have been issued by 21 local Danish financial institutions and have the status of subordinated capital.
The legal maturity is 8 years and the expected maturity is 5 years. All loans are floating rate loans with a step up margin of 150 basis points if they are not called after 5 years.

ScandiNotes® IV include three loan series: Senior, mezzanine and junior. The senior tranche is denominated in Euro, floating rate with quarterly interest payments, while the mezzanine and junior tranches are ordinary notes with a fixed coupon rate.

The mezzanine tranche should be interesting to institutional investors and other investors who will benefit from a rating and an approval from the Danish tax authorities of tax exemption on capital gains. The junior tranche has been designed especially for investors who will benefit from a 3% coupon and thereby tax exemption on capital gains. The senior tranche is not exempt from tax on capital gains.

The senior tranche makes up about 52% of the value of the total issue and is senior to the mezzanine tranche, which makes up the next 36%. Lastly the junior tranche represents the remaining 12% and is subordinated to both the senior and mezzanine tranche.

ScandiNotes® IV is listed on the OMX Copenhagen Stock Exchange. The total issue size is approximately EUR 328 million or approximately DKK 2.45 billion (exchange rate: 7.46), and is divided in three tranches:

• ScandiNotes® IV Senior 2011/2014, EUR 170.0 million; 3M Euribor + 25 bps, rated Aaa
• ScandiNotes® IV Mezzanine 2011/2014, DKK 879.6 million; fixed rate 3%, rated Baa2
• ScandiNotes® IV Junior 2011/2014, DKK 300.1 million; fixed rate 3%, not rated

The notes are issued by Mare Baltic PCC Ltd, which is a Guernsey-based SPV with a protected cell company structure which has bankruptcy remote cells, thus isolating each cells’ creditor claims to the individual cells.