DBRS Assigns New Ratings to Carneros III plc

Dominion Bond Rating Service (DBRS) has today assigned ratings to the following notes issued by Carneros III plc (collectively, the Notes).

-- EUR 146,000,000 Series A Floating Rate Credit Linked Secured Carneros III Notes due 2016 at AAA
-- USD 10,000,000 Series A Floating Rate Credit Linked Secured Carneros III Notes due 2016 at AAA
-- JPY 300,000,000 Series A Floating Rate Credit Linked Secured Carneros Notes due 2016 at AAA
-- EUR 5,500,000 Series B Floating Rate Credit Linked Secured Carneros III Notes due 2016 at AA
-- JPY 2,100,000,000 Series C Floating Rate Credit Linked Secured Carneros III Notes due 2016 at AA (low)
-- EUR 25,000,000 Series E EUR CMS Floating Rate Credit Linked Secured Carneros III Notes due 2016 at AAA

The ratings for the Notes are based on the following factors:

(1) Credit enhancement is available to each class of the Notes. In evaluating the enhancement, DBRS ran a variety of simulations and credit-migration scenarios to determine when and if the enhancement provided would equal the losses on the reference portfolio. Based on this analysis, DBRS determined that the available credit enhancement to each class of the Notes adequately addresses the risk of loss vis-à-vis its rating.

(2) For each series, there are a limited number of Credit Events. Credit Events vary depending on which country the reference entity is located in. Typical Credit Events are failure to pay, bankruptcy, obligation acceleration, repudiation/moratorium and restructuring. Credit modelling was adjusted to account for non-credit risks that can be present in a variety of these Credit Event definitions.

(3) Some of the reference entities are not investment grade. Although enhancement was sized to reflect this factor, there is some risk of greater credit volatility for non-investment-grade entities, possibly resulting in greater credit migration risk. Although past performance is not indicative of future performance, it is nonetheless a salient point for investors. However, investors should note that there is a limited ability to dismiss the Portfolio Manager and if the Portfolio Manager is removed, the Portfolio becomes static.