News Release

HSBC and Babson Capital Close US$502 Million Managed Synthetic CDO

11 October 2006

HSBC and Babson Capital Management LLC (Babson Capital) today announced the close of "Maple Hill", a managed synthetic Collaterized Debt Obligation (CDO) structure consisting of a series of mezzanine tranches rated A to AAA by Standard & Poor's.  HSBC acted as sole arranger and placement agent for the US$502 million managed synthetic CDO. The deal references a high quality portfolio of 125 global credits and provides investors access to the fundamental credit management expertise of Babson Capital.  An extended maturity of seven and 10 years also offered investors attractive yield levels in the current tight-spread environment.

The closing of Maple Hill saw in excess of US$500 million in tranches placed with multiple investors from 14 different countries across North America, Europe, the Middle East, Australia and Asia.  The transaction involved a high degree of flexibility around the basic deal terms with issuance involving: 12 issues in Swap and Credit Linked Note forms with both fixed and floating coupons across four different currencies - Hong Kong, Australian and US Dollars as well as Euros.

Matthew Natcharian, managing director and head of Babson Capital's structured credit team comments: "We continue to see strong global demand from institutional investors who view CDO tranches as an attractive way to add exposure to corporate credit.  We were happy to bring Babson Capital's extensive structuring and credit expertise to them.  HSBC exceeded our very high expectations in their structuring and execution capabilities as well as their distribution to such a diverse group of investors."

"In this tight spread environment, CDO investors across the globe are demanding high quality portfolios managed by the very best firms.  The participation rate by investors on the Maple Hill roadshow was the highest we have ever seen and reflects the strength of the Babson Capital credit team," said Stephen Olentine, head of product marketing, global structured credit products at HSBC.

Synthetic CDOs have increased in popularity in recent years as alternatives to their more traditional counterparts. In a traditional CDO, the collateral is a portfolio of debt securities, loans, or similar obligations. Synthetic CDOs securitize the inherent credit risk of the underlying collateral through credit default swaps. Maple Hill is the second broadly distributed synthetic CDO Babson Capital has brought to market this year.

Media Contacts

• Juanita Gutiérrez
• juanita.gutierrez@us.hsbc.com
• HSBC - North America
• 212.525.6282