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JSE CBN
CBN
Carbon Credit Notes - Posting Of Collateral At The Second Mark To Market Date
Carbon Credit Notes
ISSUED BY STERLING WATERFORD CCN SPV 2
(Incorporated in Mauritius)
(Registration number 53784c1/GBL)
Share code: CBN & ISIN code: MU0184E06084
POSTING OF COLLATERAL AT THE SECOND MARK TO MARKET DATE
1. INTRODUCTION
As previously disclosed:
- in order to hedge its obligations to the holders of the Carbon Credit
Notes, the Issuer has concluded a hedging agreement with Ecosecurities
Limited ("Ecosecurities") for the forward delivery of Carbon Credits;
- to hedge the risk of non-delivery by Ecosecurities under the hedging
agreement, Ecosecurities is obliged, at six-monthly mark to market
dates, to post collateral equivalent to the amount by which Carbon
Credit Market Price is higher than the forward price it will receive
under the hedging agreement ("the exposure"). The collateral is to be
posted with The Standard Bank of South Africa Limited ("SBSA") as
Collateral Escrow Agent;
- the Carbon Credit Market price is the US$ bid price of Carbon Credits
on the relevant date as determined by SBSA by obtaining quotes from
four nominated brokers, disregarding the lowest and highest of such
quotes and determining the average of the two remaining quotes to be
the Carbon Credit Market Price;
- the collateral to be posted by Ecosecurities must comprise a
combination of cash, near cash and non-near cash assets provided that
at least 20% of the collateral posted at the second mark to market
date is required to be cash and the value of any non-near cash assets
posted as collateral is to be discounted by 50%.
2. POSTING OF COLLATERAL
In the risk factors relating to the Carbon Credit Notes in the circular,
investors were advised that at the date of the circular there was no spot
price for Carbon Credits and that trading in Carbon Credits was limited to
project specific forward contracts.
This is still the case and, accordingly, in determining the Carbon Credit
Market price for the second mark to market date of 4 November 2005, the
brokers polled provided quotes for the price that they would bid for
specific forward contracts with Ecosecurities. Based on these polls, the
Carbon Credit Market Price at the second mark to market date was US$11.67
per Carbon Credit.
Based on the relevant Carbon Credit Market Price and the forward price
under the hedging agreement, SBSA have determined that the amount of the
exposure for which collateral needs to be placed is US$3 453 714.
The exposure of US$3 453 517 has been collateralised by the posting with
SBSA of:
- US$ 690 703 in cash; and
- non-near cash assets in the form of forward contracts for Carbon
Credits with a value of US$9 177 758,
resulting in collateral with a total value (after discounting the value of
the non-near cash collateral by 50%) of US$5 525 628 having been posted.
Johannesburg
24 February 2005
Manager
Sterling Waterford Securities (Pty) Ltd
Sponsor
Java Capital (Proprietary) Limited
Collateral Escrow Agent
The Standard Bank of South Africa Limited
Trustee
Sentinel International Trust Company (Pty) Ltd
Date: 24/02/2006 11:20:04 AM Produced by the JSE SENS Department
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