Fitch Ratings has downgraded the mortality credit-linked notes issued by Signum Finance Cayman Limited Series 2010-09 (STORM 8 November 2010) from single-A plus to single-A. The agency's rating outlook for the notes is now stable.

The downgrade is based on the rating of Goldman Sachs Group as the highest risk-presenting factor in the deal, Fitch says. The agency downgraded Goldman Sachs Group's issuer default rating to single-A on 15 December 2011.

Signum Finance Cayman is a bankruptcy-remote SPV established to issue the notes, the proceeds of which are used to purchase collateral assets in the form of 15-year senior unsecured bonds issued by Goldman Sachs Group. The issuer also entered into a 15-year CDS with Goldman Sachs International (GSI) as the swap counterparty.

Under the CDS, the SPV provides mortality protection on a defined block of US level-term life insurance policies. The SPV makes payments to GSI in the event actual mortality experience of the defined block exceeds specified trigger levels, while the fixed payments from GSI to the SPV will be paid to investors in the notes.

Fitch's credit analysis of the notes is credit-linked to the ratings of Goldman Sachs Group, as guarantor to GSI, the swap counterparty and backup collateral assets settlement provider (CASP), as well as the excess-mortality experience of the defined insurance block. The swap counterparty guarantor and the collateral assets issuer are the same, and are therefore treated as one risk-presenting factor. Using the ratings of these risk-contributing factors in the transaction, Fitch applied the two-risk CLN matrix under its criteria for single- and multi-name credit-linked notes to quantify the effect on the rating of the notes.