Settlement of credit events and going concern

MONTREAL, Nov. 28, 2016 /CNW Telbec/ - Global Diversified Investment Grade Income Trust II ("Global DIGIT II") (TSX:GII.UN) had issued a press release on November 21, 2014 following the receipt from Deutsche Bank AG Canada Branch ("DB") of credit event notices for the reference obligations of the following issuers:

 

Credit Exposure

Underlying Issuers

Series

Type of
Credit Event

Weighting as of September 30,
2016(1)

Exposure as of September 30,
2016(1)(2)

Exposure as of
September 30,
2016 on a per unit basis(1)

C

Ace Securities Corp

2004-HE4

Loss Event

0.18%

$4,949,492

$0.51

C

Ace Securities Corp

2004-RM2

Loss Event

0.02%

$656,531

$0.07

C

CHL Mortgage Pass‑Through Trust 2004‑25

2004-25

Loss Event

0.14%

$3,789,301

$0.39

C

Countrywide Asset Backed Certificates

2004-10

Loss Event

0.05%

$1,459,297

$0.15

C

G‑Star Ltd

2004-4

Loss Event

0.46%

$12,707,643

$1.30

C

HarborView Mortgage Loan Trust Series 2006‑12

2006‑12

Loss Event

0.91%

$25,415,287

$2.60

Total

1.76%

$48,977,551

$5.02

(1)

The information as to the weighting and exposures has been updated.

(2)

Exposure means that the maximum loss that can be incurred on a single reference obligation in Credit Exposure C.

 

Disclosures of these credit events have been made and discussed in the continuous disclosure documents of Global DIGIT II such as the Management Reports on Fund Performance and the financial statements.

Global DIGIT II announces that DB's valuation process has now ended and that it has received a confirmation that the recovery level or final price was zero for two of these reference obligations.

Pursuant to the financial contract entered into between Global DIGIT II and DB on March 2, 2005, as modified on January 20, 2009 (the "Financial Contract"), the total exposures of Global DIGIT II to Credit Exposure C is now set at $29,006,573 ($2.79 per unit). Credit Exposure C is the only remaining credit exposure for Global DIGIT II.

Based on the applicable weighting, any recovery further to the valuation process for an amount less than 40.73% of the aggregate notional amount of the affected reference obligations meant a total loss for Credit Exposure C.

The losses in Credit Exposure C amount to $3.90 per unit but are limited pursuant to the Financial Contract to $2.79. These losses represent a total loss for Credit Exposure C, thereby reducing the investment in the Financial Contract to zero.

To settle these losses, Global DIGIT II will have to transfer to DB either the remaining collateral held by DB (with a face value of $29,006,573) or cash in the same amount to support its obligations pursuant to the terms of the Financial Contract. Since the receipt of the credit event notices in November 2014, DB has withheld the premium payments on the defaulted reference obligations.

As a result of the transfer of all the collateral and of the loss of interest revenue thereon, the only remaining assets of Global DIGIT II will be its cash position. With the upcoming termination of the Financial Contract, Global DIGIT II will cease to have a purpose and the revenues on its cash will not be sufficient to cover its costs and continue as a going concern. In this context, it will then be more desirable to initiate the liquidation of Global DIGIT II.

The net asset value as at November 15, 2016 was estimated at $0.28 per unit, representing the cash position and a then current market premium on the collateral. An amount will be set aside to cover all liquidation expenses and contingencies to be incurred by Global DIGIT II up to its dissolution.

Global DIGIT II has been advised by the TSX that the units could be subject to a delisting.

About Global DIGIT II

Global DIGIT II provides an economic interest in an equity tranche of credit default swap agreements in respect of portfolios of residential mortgage-backed securities, commercial asset-backed and mortgage-backed securities, consumer asset-backed securities, structured exposures to mortgage-backed and asset-backed and corporate securities.

 

SOURCE GLOBAL DIVERSIFIED INVESTMENT GRADE INCOME TRUST II

For further information: Antoine Fourgeaud: 514-394-6645, http://info.fbn.ca/trusts


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