Approx. JPY 5.0 billion Beneficial Interests Rated
Tokyo, October 14, 2010 -- Moody's Japan K.K. has assigned a provisional rating
of (P)Aaa (sf) to North Pacific Bank Hybrid Beneficial Interests Series
6. This transaction references a portfolio of residential mortgage
loan receivables originated by North Pacific Bank, Ltd.
The rating addresses the expected loss posed to investors by the legal
final maturity date. The structure allows for timely payments of
dividends (in scheduled amounts, on scheduled payment dates),
and ultimate repayment of principal by the legal final maturity date.
Moody's issues provisional ratings in advance of the final sale of the
securities. These ratings, however, only represent
Moody's preliminary credit opinions. Upon a conclusive review of
the transaction and associated documentation, Moody's will endeavor
to assign definitive ratings to the Beneficial Interests. Definitive
ratings may differ from provisional ratings. The provisional rating
is based on the information received as of October 13, 2010.
The complete rating actions are as follows:
Transaction Name: North Pacific Bank Hybrid Beneficial Interests
Class: the Class A Beneficial Interests
Issue Amount: JPY 4,996,643,132
Scheduled Dividend: Fixed
Payment Frequency: Monthly
Rating: (P)Aaa (sf)
Reference Portfolio Size at Closing: JPY 4,996,643,132
Expected Closing Date: October 29, 2010
Legal Final Maturity Date: September 25, 2045
Seller: North Pacific Bank, Ltd. (North Pacific Bank)
Originator /Servicer: North Pacific Bank
Asset Trustee: Mizuho Trust & Banking Co., Ltd.
(Mizuho Trust Bank)
ABL Lender/ABL Seller: Mizuho Securities Co., Ltd.
ABL Trustee: Mizuho Trust Bank
Initial Deposit Bank: Mizuho Corporate Bank, Ltd. (Aa3/Prime-1)
Arranger: Mizuho Securities
The dividend and principal payments of the Class A Beneficial Interests
are backed by interest and principal payments of the ABL. The redeemability
of the rated debt instruments is thus equal to that of the ABL.
The principal payments of the ABL are backed by the Risk-Free Asset,
which will be deposited in an account at an eligible financial institution
(both Moody's long-term deposit rating of A2 or higher and
a short-term rating of P-1) pursuant to the governing documents
of this transaction; at closing, it will be deposited in an
account at Mizuho CB.
The account will be drawn down on a monthly basis in an amount equal to
the monthly principal collections from the reference pool, so as
to pay the principal of the ABL. In this circumstance, so
long as no Termination Event has taken place, the schedule of the
principal payments of the ABL will be subject to the principal collections
(comprising regular payments, prepayments, subrogation,
repurchase by the Seller, and Group Life Insurance benefits) from
the residential mortgage loan receivables in the reference pool.
Upon the occurrence of a Termination Event, the Asset Trust will
be terminated and the account in which the Risk-Free Asset is invested
will be drawn down in full to pay the outstanding balance of the ABL,
accordingly paying down the Class A Beneficial Interests.
North Pacific Bank (Seller) will entrust a pool of its residential mortgage
loan receivables and cash to Mizuho Trust Bank (Asset Trustee).
In turn, it will receive Seller Trust Certificates in an amount
equivalent to the entrusted pool, as well as Cash Reserve Trust
Certificates in an amount equivalent to the entrusted cash. ("Asset
The Servicer will service the residential mortgage pool pursuant to a
servicing agreement with the Asset Trustee.
The entrustment of the receivables will not be perfected against obligors
or third parties.
The Seller will keep the Group Life Insurance on the entrusted receivables
with insurance companies. The insurance costs are payable by the
The entrusted receivables are guaranteed by North Pacific Co.,
Ltd. ("Guarantor"). The Guarantor will make a subrogation
on a defaulted receivable.
The Asset Trustee will take out a limited recourse loan (ABL) that amounts
to the initial principal balance of the entrusted pool from Mizuho Securities
The ABL proceeds will be invested as a Risk-Free Asset in an account
at an eligible financial institution, initially Mizuho CB.
Should the bank no longer be eligible, the outstanding principal
of the account will be transferred to an account at an eligible financial
institution within 30 days.
The ABL Lender will entrust the ABL to Mizuho Trust Bank (ABL Trustee)
and in turn will receive the Class A Beneficial Interests. ("ABL
Mizuho Securities will sell the Class A Beneficial Interests to investors.
Residential mortgage loan receivables in the reference portfolio will
be repurchased by North Pacific Bank in its capacity as Seller,
if they incur any of the following events:
They constitute defaulted receivables, and claims for subrogation
are not made.
They constitute defaulted receivables, and are not compensated
for by the subrogation by the Guarantor within the two months following
without a reasonable excuse.
The optional periods to update the fixed interest rate expire.
Interest rates are lower than ABL's interest rate.
Upon the occurrence of the following Termination Event so as to secure
principal payments of the ABL, the Asset Trust will be terminated
and the account in which the Risk-Free Asset is invested will be
drawn down in full to pay the outstanding balance of the ABL:
A default by the Originator/Servicer
The failure of the Originator to fulfill its obligation to repurchase
ineligible assets from the reference portfolio
The failure of the Originator to pay trust fees of the Asset Trust
Cash reserves at the Asset Trust level short of their required amounts,
and not covered by additional cash entrustment from the Originator
Failure in appointing a substitute eligible financial institution
within 30 days, when the bank is no longer eligible
North Pacific Bank, Ltd., acting as Originator and
Servicer, is the largest bank in The Second Association of Regional
Banks, headquartered in Sapporo, Hokkaido; it incorporated
in 1917. As of March 31, 2010, its equity capital came
to approximately JPY 73.2 billion. Staff of North Pacific
Bank totaled 3,714.
Moody's conducted a review of North Pacific Bank, focusing on its
business franchises and policies, its role as an originator,
and its ability as Servicer. Moody's also reviewed its operations
as a servicer and considers the bank sufficiently capable of servicing
The principal methodology used in this rating was "Updated: Moody's
Approach to Rating RMBS Transactions in Japan", published on September
30, 2010 on www.moodys.co.jp. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found 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.
In this transaction, the principal collections from the residential
mortgage pool will not be used to make any principal payments on the ABL
or the Class A Beneficial Interests. Thus, Moody's believes
that the credit quality of the loan pool will not affect the rating assigned
to the Class A Beneficial Interests.
Moody's assigned the rating to the Class A Beneficial Interests based
mainly on the credit quality of the eligible financial institution in
which the proceeds are invested as a Risk-Free Asset. If
the bank is no longer eligible and if the outstanding principal in the
account is not transferred to a substitute eligible financial institution
within 30 days, The ABL will be fully repaid, accordingly
paying down the Class A Beneficial Interests. Therefore,
the impact on the rating to the Class A Beneficial Interests will be extremely
Two out of the four factors to determine V scores, relevant to historical
data and performance variability, are not applicable to our ratings
analysis therefore, we are not assigning a V score to this transaction.
Parameter Sensitivities are also not calculated as they are not very applicable,
as the rating will not be affected by the credit quality of the loan pool.
Moody's did not receive or take into account a third-party
due diligence report on the underlying assets or financial instruments
in this transaction.
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
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, loan-by-loan data and contracts.
Information sources used to prepare the credit rating are the following
parties involved in the rating such as the Arranger and the Originator;
public information; and confidential and proprietary Moody's
Measures taken to ensure the quality of this information include representations
and warranties and reviews by a third party.
Moody's considers the quality of information available on the issuer
or obligation satisfactory for the purposes of assigning a credit rating.
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 responded to us that they would disclose
related information pertinent to this transaction through Moody's
press release and its presale report.
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.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
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 Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Asst Vice President - Analyst
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 Japan K.K.
Moody's assigns a provisional rating to North Pacific Bank's Hybrid RMBS Series 6
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku