JPY 20.0 billion in Senior Beneficial Interests affected
Tokyo, December 24, 2010 -- Moody's Japan K.K. has assigned a definitive rating to the
S2010-12 transaction, amounting to JPY 20.0 billion
and backed by credit card purchase 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), and ultimate
payment of principal by the final maturity date.
The complete rating action follows:
Deal Name: S2010-12
Class: Senior Beneficial Interests
Rating: Aaa (sf)
Issue Amount: JPY 20.0 billion
Scheduled Dividend Rate: Fixed
Payment Frequency: Monthly
Entrustment Date: December 17, 2010
Transfer Date of Senior Beneficial Interests: December 24,
2010
Revolving Period: From December 2010 to January 2012
Final Maturity Date: November 20, 2018
Underlying Asset: Credit card purchase receivables
Total Amount of Receivables (Principal Amount): JPY30,000,313,350
Arranger: Rakuten Bank, Ltd.
RATING RATIONALE
The Seller, functioning as both originator and servicer, entrusted
a pool of eligible credit card purchase receivables and cash under Item
3 of Article 3 of Japan's Trust Law.
It then acquired the Senior Beneficial Interests, a Subordinated
Beneficial Interest and a Seller's Beneficial Interest.
The seller holds the Subordinated Beneficial Interest and the Seller's
Beneficial Interest, but transferred the Senior Beneficial Interests
to Investors. The transfer of the Senior Beneficial Interests 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
24.0% of the initial principal balance of investors' beneficial
interests (the total of the Senior Beneficial Interests and the Subordinated
Beneficial Interest).
The Senior Beneficial Interests will be redeemed in a sequential,
monthly, pass-through amortization after a one-year
revolving period. Defaulted receivables in the underlying pool
will be used as payment in kind for dividends on the Subordinated Beneficial
Interest, while cash in an amount equivalent to the principal balance
of the defaulted receivables will be transferred from the interest collection
account to the principal collection account (default trapping mechanism).
Additional enhancement will be built up in line with deterioration in
the performance of the pool through a dynamic reserve mechanism.
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.
Key early amortization events include a breach of the default rate.
If any trustee replacement events occur, a back-up trustee
(appointed at closing) will take over as the asset trustee. If
any servicer replacement events occur, the asset trustee can dismiss
the Servicer. A back-up servicer is not appointed at closing.
However, if a back-up servicer stand-by event occurs,
the asset trustee will appoint one.
In preparation for servicer replacement, liquidity is provided in
the form of a cash reserve at closing. This reserve will cover
the dividend payments on the Senior Beneficial Interests, trust
fees, and fees relating to start back-up trustee and back-up
servicer operations, etc.
Commingling risk is covered by the Seller's Beneficial Interest.
The ratings are based mainly on the strength of transaction structure,
the credit of the receivables, and the servicer's experience.
Moody's has estimated the annualized expected default rate of the
underlying assets at approximately 8.5%, taking into
consideration receivable attributes, historical data on the seller's
entire pool, performance data on existing securitization pools,
and industry trends. Moody's has also estimated in its base
case scenario a monthly principal payment rate of around 5% and
an annual yield of around 15% (These parameters are based on Moody's
definition for analytical purposes, and thus may not be comparable
to other data). To determine the rating, Moody's also
conducted a cash flow analysis by adding stress consistent with the assigned
rating on these parameters.
Moody's assumes that, given the structure of the transaction
as well as other factors, the risk of interruption to the cash flow
from the assets in the event of the seller's or the asset trustee's
bankruptcy is sufficiently minimized to achieve the rating assigned.
Moody's examined the seller's operations and considers it
sufficiently capable of servicing the underlying pool as initial servicer,
given its substantial experience in the credit card industry.
The principal methodology used in this rating was "Moody's
Approach To Rating Credit Card Receivables-Backed Securities,"
published on December 6, 2010, and available on www.moodys.co.jp.
Moody's did not receive or take into account any third-party
due diligence reports on the underlying assets or financial instruments
in this transaction.
The V Score for this transaction is Low/Medium, the same score assigned
to the Japanese Credit Card ABS sector. Moody's has assigned ratings
to securitizations of credit card receivables originated by the seller
for more than five years. The asset entrustment in this transaction
differs from that in a typical ABS but has a limited impact on the V Score.
The transaction's level of complexity is similar to that of a typical
credit card ABS.
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, not to individual tranches.
If the transaction default rate used in determining the initial rating
were changed to 11.0% or 12.5%, the
model output for the Senior Beneficial Interests in these two scenarios
would be one notches down (Aa1) for an 11.0% default rate,
and two notches down (Aa2) for a 12.5% default rate (the
"parameter sensitivities"). 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.
The methodologies, "Updated Report on V Scores and Parameter
Sensitivities for Structured Finance Securities," published
on September 30, 2010, and " V Scores and Parameter Sensitivities
in the Global Credit Card ABS Sector," published on September 30,
2010, are available on www.moodys.co.jp.
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.
REGULATORY DISCLOSURES
For an explanation of the (sf) indicator, please see "Moody's
Structured Finance Rating Scale" on www.moodys.com.
The principal information used to prepare the credit rating comprised
historical data, attribution data, and contracts.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings (the Arranger, etc.);
public information; and confidential and proprietary Moody's
information.
Measures taken to ensure the quality of this information include representations
and warranties.
Moody's considers the quality of information available on the issuer
or obligation satisfactory for the purposes of assigning a credit rating.
A profile of the originator follows:
Business sector: Financial industry
Size of business: More than JPY 100 billion in total assets
Location: Tokyo
Reason for non-disclosure: Given the possibility that information
about this transaction could be used for objectives different from those
originally intended, disclosing the originator's name may
have a negative impact.
Moody's encouraged rating-related entities to disclose any
information that may be pertinent to this transaction, including
items described in "Information Considered Important in Evaluating
the Appropriateness of a Credit Rating" on www.moodys.co.jp,
or to take other measures to enable third parties to verify the appropriateness
of the credit rating.
Rating-related entities have responded to us that they would not
disclose information pertinent to this transaction to third parties except
through Moody's press release. However, they would
disclose related information pertinent to this transaction to potential
investors in the transaction.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Credit ratings are Moody's current opinions of the relative future credit
risk of entities, credit commitments, or debt or debt-like
securities. Moody's defines credit risk as the risk that an entity
may not meet its contractual, financial obligations as they come
due and any estimated financial loss in the event of default. Credit
ratings do not address any other risk, including but not limited
to: liquidity risk, market value risk, or price volatility.
Credit ratings do not constitute investment or financial advice,
and credit ratings are not recommendations to purchase, sell,
or hold particular securities. No warranty, express or implied,
as to the accuracy, timeliness, completeness, merchantability
or fitness for any particular purpose of any such rating or other opinion
or information is given or made by Moody's in any form or manner whatsoever.
The credit risk of an issuer or its obligations is assessed based on information
received from the issuer or from public sources. Moody's may change
the rating when it deems necessary. Moody's may also withdraw the
rating due to insufficient information, or for other reasons.
Moody's Japan K.K. is a credit rating agency registered
with the Japan Financial Services Agency and its registration number is
FSA Commissioner (Ratings) No. 2. The Financial Services
Agency has not imposed any supervisory measures on Moody's Japan K.K.
in the past year.
Please see ratings tab on the issuer/entity page on the Moody's website
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Credit Ratings were fully digitized and accurate
data may not be available. Consequently, Moody's provides
a date that it believes is the most reliable and accurate based on the
information that is available to it. Please see the ratings disclosure
page on the Moody's website for further information.
Please see the Credit Policy page on the Moody's website for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Tokyo
Takako Tokinaga
Asst Vice President - Analyst
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Tokyo
Yusuke Seki
Senior Vice President - Team Leader
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's assigns a definitive rating to S2010-12 credit card receivables ABS
