JPY 16.8 billion in Senior Beneficial Interests and Trust ABL affected
Tokyo, June 30, 2010 -- Moody's Investors Service has assigned definitive ratings of Aaa to the
NBL-1006 Senior Beneficial Interests and Trust ABL, totaling
JPY 16.8 billion, backed by auto loan receivables.
The ratings address the expected loss posed to investors by the final
maturity date. The structure allows for timely payments of dividends
(in scheduled amounts, on scheduled payment dates), timely
payments of interest, and ultimate payment of principal by the final
The ratings and a summary of the transaction follow.
Deal Name: NBL-1006
Class, Amount, Dividend/Interest, Rating
Class A Senior Beneficial Interests, JPY 7.2 billion,
Class B Senior Beneficial Interests, JPY 6.3 billion,
Class A Trust ABL, JPY 3.3 billion, Fixed, Aaa
Moody's assigned provisional ratings to the beneficial interests and ABL
on May 28, 2010.
Moody's had assigned a provisional rating to the NBL-1006 Class
B Trust ABL on May 28, 2010. Moody's has withdrawn it as
the full amount has been procured through the Class A and B Senior Beneficial
Interests and Class A Trust ABL.
Scheduled Total Issue Amount: JPY 16.8 billion
Payment Frequency: Monthly
Entrustment Date: June 21, 2010
Transfer Date of Beneficial Interests/ Loan Funding Date: June 30,
Final Maturity Date: June 25, 2018
Underlying Asset: Auto loan receivables
Total Amount of Receivables (Principal Amount): JPY 22,029,971,635
Seller/Servicer: Orient Corporation ("Orico",A3)
Asset Trustee: Mizuho Trust & Banking Co., Ltd.
Arranger/Underwriter: Mizuho Securities Co., Ltd.
This deal is a second securitization arranged by MHSC and comprising Orico's
auto loans, "New Budget Loan (described later)."
The previous one was "NBL-0912" issued on December
25, 2009. Moody's had previously rated "NBL-0912".
DESCRIPTION OF UNDERLYING ASSETS
The underlying assets consist of auto loan receivables originated by Orico
under the "New Budget Loan" program.
Unlike typical auto loans, this type of loan allows obligors to
set irregular payment schedules and make partial prepayments. Some
of the loans also allow obligors to skip payments and change payment schedules
during the loan periods (under specific conditions).
This program has allowed Orico to raise its balance, as it was able
to originate JPY 70.0 billion in New Budget Loans between April
2009 and May 2010.
This deal's underlying assets' components differ from those
of the previous deal, NBL-0912. The divergent points
are 1) inclusion of guaranteed loans with higher interest rates,
2) a higher share of the loans which include the right for change in payment
schedules, and 3) origination mainly in 2010.
Orico entrusted a pool of its auto loan receivables to MHTB, and
the asset trustee issued the Senior Beneficial Interests (Class A and
B Senior Beneficial Interests) and a Subordinated Beneficial Interest.
Entrustment of the receivables was perfected against third parties under
the Perfection Law (the Law Prescribing Exceptions, Etc.,
to the Civil Code Requirement for Setting Up Against a Third Party to
an Assignment of Claims and Chattels). Perfection against obligors
will not be made until certain events occur.
The asset trustee used the proceeds from a limited recourse loan (Class
A Trust ABL) procured from the ABL investors to redeem part of the Class
A Senior Beneficial Interests. Orico holds the Subordinated Beneficial
Interest, but transferred the Senior Beneficial Interests (excluding
the portion redeemed by the Trust ABL) to the investors through MHSC.
The transfer was perfected against the relevant obligors and third parties
under Article 94 of Japan's Trust Law.
Credit enhancement is provided by the senior/subordinated structure and
available excess spread. Subordination comprises approximately
23.7% of the total of the total outstanding amount of the
The Class A Beneficial Interests and the Class A Trust ABL will be redeemed
in a scheduled monthly amortization. The Class B Beneficial Interests
will be redeemed on a monthly pass-through basis. The Subordinated
Beneficial Interest will be redeemed to the extent that the required enhancement
level is maintained.
If any early amortization events occur, the dividend waterfall to
the Subordinated Beneficial Interest will be suspended and excess spread
will be used to redeem the Senior Beneficial Interests and the Trust ABL.
Key early amortization events include a servicer replacement event occurring
and asset performance triggers being reached.
In preparation for servicer replacement, liquidity is provided in
the form of a cash reserve at closing. This reserve will cover
dividend/interest payments on the Senior Beneficial Interests and the
Trust ABL, trust fees, and fees relating to start back-up
servicer operations, etc.
If any servicer replacement events occur, then the Asset Trustee
can dismiss the Servicer. A back-up servicer was appointed
at closing. Commingling risk is covered by the Subordinated Beneficial
RATING OPINION SUMMARY
After taking into account this transaction's structures, etc,
Moody's assumes that the risk of interruption to cash flow from
the assets -- due to the seller's or the Asset Trustee's
bankruptcy -- is considered sufficiently minimal for the
purposes of achieving the rating assigned.
Having factored in receivables' attributes, historical data
on the seller's entire pool, ongoing performance data on existing
securitization pools, and the industry trends, Moody's
estimates the annual default rate at 2.4%-3.0%.
Moody's believes that each credit enhancement of the Senior Beneficial
Interests and Trust ABL is sufficient enough to assign Aaa rating to the
transaction. (These parameters are that Moody's input into
the model to analyze and may differ from the seller's definition.)
Moody's examined the seller and considers the company sufficiently
capable of servicing the underlying pool as the seller has substantial
experience in the auto loan industry as initial servicer.
Orient Corporation, established in 1951 and headquartered in Chiyoda-ku,
Tokyo, is a major Japanese finance company. Its main lines
of business include credit card shopping, installment shopping credit,
credit guarantee, and loan.
As of end-March 2010, Orico had total consolidated assets
of approximately JPY 4,298.6 billion and net assets of JPY
188.5 billion. Orico's auto loan receivables (non-consolidated
and including securitized receivables) totaled approximately JPY 1,393.9
On May 14, 2010, Orico announced that preferred shares of
Orico (B-H) held by Mizuho Bank, Ltd. (MHBK) and Mizuho
Corporate Bank, Ltd. (MHCB) will be converted into common
shares in the first half of FYE 3/2011.
After the conversion, common shares held by Mizuho Financial Group
(MHFG), the holding company of MHBK, MHCB and MHTB,
will total around 27.2% and Orico will be an equity method
affiliate of MHFG.
The V Score for this transaction is Low/Medium, which is a little
worse than the Low V score assigned to the Japanese Auto Loan ABS sector.
The difference stems from the transaction's loan characteristics
and the data period for "New Budget Loans". In Moody's view,
1) the amount of supplemental data it has received from the originator
and from the monitoring analysis of the previous series is sufficient
to assign the ratings and 2) the favourable senior ABS structure contributes
to rating stabilization.
Moody's has not downgraded any ABS deals backed by Orico's
auto loans. They are redeemed in full by their final maturity date,
if the day has passed.
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability of various inputs in
a rating determination. The V Score ranks transactions by the potential
for significant rating changes owing to uncertainty about the assumptions
due to data quality, historical performance, the level of
disclosure, transaction complexity, modeling, and the
transaction governance that underlie the ratings. V Scores apply
to the entire transaction (rather than to individual tranches).
If the default rate used in determining the initial rating were changed
to 5.0% or 6.0%, the quantitative/model-indicated
Parameter Sensitivities for the Senior Beneficial Interests and the Trust
ABL in these two scenarios would be zero notches down for 5.0%
default rate, and one notch down for the 6.0% default
Moody's analyzed that the rating volatility has become smaller than
that at the time of the provisional rating. The stability comes
from the coupon rate assumption.
The fixed rate was lower than that assumed at the time of the provisional
rating. The lower coupon rate increases the deal's credit
enhancement from the excess spread, and the rating will endure when
the default rate worsens.
Parameter Sensitivities are not intended to measure how the rating of
the security might migrate over time; rather they are designed to
provide a quantitative calculation of how the initial rating might change
if key input parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged, and does not factor
structural features such as sequential payment effect. Parameter
Sensitivities reflect only the ratings impact of each scenario from a
quantitative/model-indicated standpoint. Qualitative factors
are also taken into consideration in the ratings process, so the
actual ratings that would be assigned in each case could vary from the
information presented in the Parameter Sensitivity analysis.
Reference to Relevant Methodology
The principal methodology used in rating the transaction was "Credit Enhancement
Analysis in Japanese Auto Loan-Backed Securitization," published
in December 2001 which can be found at www.moodys.com in
the Research and Ratings directory, in the Rating Methodologies
subdirectory. Other methodologies and factors that may have been
considered in the process of rating this issue can also be found in the
Rating Methodologies subdirectory. Further information on Moody's
analysis of this transaction is also available on www.moodys.com.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
The methodology, "Updated Report on V Scores and Parameter
Sensitivities for Structured Finance Securities" published in December
2008 and "V Scores and Parameter Sensitivities in the Non-U.S.
Vehicle ABS Sector" published in January 2009, are available
Moody's Investors Service is a publisher of rating opinions and research.
It is not involved in the offering or sale of any securities, nor
is it acting on behalf of the offering party. This release is not
a solicitation or a recommendation to buy, hold, or sell securities.
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Senior Vice President - Team Leader
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's assigns Aaa to NBL-1006 auto loan receivables ABS