Asset Portfolio Rating Action

The asset portfolio rating is as follows:

Asset portfolio: 667.5mn par value: AA_AP under review for downgrade

Scope’s review considered the latest available holdings list as of 29 January 2021 and public information.

Portfolio description

The portfolio held by GAM Greensill Supply Chain Finance Fund SCSP (GAM Greensill SCF Fund) comprises notes issued by three pass-through bankruptcy-remote SPVs. The notes are backed by irrevocable payment obligations from investment-grade obligors by way of an obligor’s approval of an invoice received from a given supplier – resulting in a supply chain financing receivable. Insurance protects against the credit risk of an investment-grade obligor’s potential non-payment. The insurance company must have a minimum credit quality commensurate with an A rating.

Rating rationale

Scope has placed the asset portfolio rating under review based on potential developments following the closure of GAM Greensill SCF Fund and the increased uncertainty associated with a run-down scenario of the fund. The review will mainly focus on (i) whether the portfolio will continue to be fully insured against defaults and by whom; (ii) the credit quality of the underlying obligors; and (iii) any changes to the asset manager’s strategy during the run-off phase.

On 2 March 2021 GAM Investments (GAM) announced it was closing the GAM Greensill SCF Fund due to market developments in supply chain finance. As the portfolio manager, GAM publicly expressed its absence of concerns about asset valuations in the portfolio and that all assets were fully insured against default by third-party insurers.

The closing of the GAM Greensill SCF Fund follows recent developments involving Greensill Capital (UK) Ltd. (Greensill). The company is a specialist financial services firm focusing on trade and structured finance. Greensill originated and managed the supply chain finance programmes under which the obligations from the obligors were created for the GAM Greensill SCF Fund. Greensill also arranged the insurance policies and covered the associated costs.

Key rating drivers

CREDIT POSITIVE (+)

Available cash¹: Cash comprised a large share of the 667.5mn portfolio as of 29 January 2021.  

Strong portfolio¹: The current portfolio complies with the investment criteria. Excluding cash, the weighted average obligor credit rating is BBB, while the weighted average insurer rating is A+.

Obligors with global reach: The obligors of the underlying supply chain financing receivables generally operate on a global scale, which reduces the adverse impact from local economic shocks.

Obligor incentives: Even weak obligors have a strong incentive to prioritise the supply chain receivables, as a break-down of the supply chain would have a negative impact on its business model and reduce the possibility for a restructuring.

CREDIT NEGATIVE (-)

Event uncertainty: Market events are evolving quickly and the impact on the portfolio assets cannot be fully determined at this stage.

Uncertain wind down strategy: The wind down strategy of the fund is not yet clear.

Rating-change drivers

Following an updated analysis of the developments the review status will be resolved with the ratings being upgraded, downgraded, or confirmed.

Rating driver references
1. Portfolio holdings as of 29 January 2021

Stress testing
No stress testing was performed.

Cash flow analysis
No cash flow analysis was performed.

Methodology
The methodology used for this asset portfolio rating is the Asset Portfolio Rating Methodology (9 April 2020) and is available at https://www.scoperatings.com/#!methodology/list. The asset portfolio rating is not a credit rating under the CRA regulation, but an ancillary service provided by Scope Ratings.
Information on the meaning of ancillary services, including definitions of default and recoveries can be viewed in the “Rating Definitions - Credit Ratings and Ancillary Services” published on https://www.scoperatings.com/#!governance-and-policies/rating-scale.
Scope Ratings considers the quality of information available to Scope Ratings on the rated portfolio to be satisfactory. The information and data supporting Scope Ratings’ asset portfolio rating originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.

Regulatory disclosures
This asset portfolio rating is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thomas Miller-Jones, Associate Director
Person responsible for approval of the asset portfolio rating: David Bergman, Managing Director
The asset portfolio rating was first released by Scope Ratings on 24 April 2019.

Conditions of use / exclusion of liability
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