JPY804 million in debt securities affected
NOTE: On December 29, 2020, the press release was corrected as follows: In the REGULATORY DISCLOSURES section, the hyperlink in the environmental, social and governance (ESG) risks paragraph was changed to https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406. Revised release follows.
Tokyo, December 14, 2020 -- Moody's SF Japan K.K. has assigned a definitive rating to
Auto Loan ABS Program 2012 Series. This transaction is backed by
auto loan receivables.
The complete rating action is as follows:
Transaction Name: Auto Loan ABS Program 2012 Series
Class: ABL
Rating: Aaa (sf)
Issue Amount: JPY804 million
Interest Rate: Fixed
Closing Date: December 14, 2020
Final Maturity Date: February 18, 2027
Underlying Asset: Auto loan receivables
Total Amount of Receivables: JPY995,316,265 (JPY972,858,680
in principal)
Loan Fund Trustee/Money Fund Trustee: Mizuho Trust & Banking
Co., Ltd. ("Mizuho Trust")
Arranger: Mizuho Trust
RATINGS RATIONALE
The Loan Fund Trustee enters the affiliated auto loan program agreement
with the affiliated financial institution, acting as originator
and initial servicer. The affiliated auto loans are guaranteed
by the affiliated financial institution.
The Loan Fund Trustee extends the affiliated loan to obligors based on
the affiliated auto loan agreement.
The originator entrusts cash to the Money Fund Trustee to enhance the
credit and the liquidity of the Auto Loan Fund, and receives the
Money Fund Beneficial Interest.
The Money Fund Trustee entrusts the cash, in an amount equal to
the Money Fund Beneficial Interest, to the Loan Fund Trustee,
and receives the Class 2 Beneficial Interest.
The originator entrusts cash to the Loan Fund Trustee and receives the
Class 1 Beneficial Interest. The Loan Fund Trustee receives a limited
recourse loan (the ABL) from the ABL investor, and redeems the Class
1 Beneficial Interest in full.
Credit enhancement is provided by the senior/subordinated structure and
available excess spread. Subordination (excluding liquidity reserves)
comprises approximately 21.2% of the total outstanding amount
of the ABL and the Class 2 Beneficial Interest.
The ABL is redeemed on a monthly pass-through basis. The
Class 2 Beneficial Interest is partly redeemed to the extent that the
required enhancement is maintained.
If any early amortization events occur, the dividend waterfall to
the Class 2 Beneficial Interest is suspended, and excess spread
is used to redeem the ABL of this series (Auto Loan ABS Program 2012 Series).
Auto loans' interest and principal collected from Auto Loan ABS program
series which have their ABLs already fully redeemed will be distributed
to the outstanding ABLs from other Auto Loan ABS program series.
This cross collateralization mechanism is implemented via the Money Fund,
which is held by the Money Fund Trustee.
Early amortization events include a servicer replacement event occurring,
such as the occurrence of an uncured principal deficiency ledger (PDL)
or the bankruptcy of the affiliated financial institution.
If any servicer replacement events occur, the trustee can dismiss
the servicer and have a back-up servicer take over the servicing
operations. A back-up servicer is appointed at closing.
In preparation for servicer replacement, liquidity is provided in
the form of a cash reserve at closing. This reserve covers several
months of interest payments on the ABL, as well as fees relating
to initial and ongoing back-up servicer operations.
Commingling risk is covered in full by the Class 2 Beneficial Interest.
The rating is based mainly on the credit quality of the receivables,
the transaction structure, and the servicer's experience.
Moody's estimated the annualized expected default rate of the underlying
assets at 2.5% (cumulative expected default rate:
approximately 4.9%, Aaa credit enhancement:
approximately 14.5%), after taking into consideration
receivable attributes, historical data on the originator's
entire pool, performance data on existing securitization pools,
and industry trends. The expected default rate is based on the
default definition used in Moody's analysis and may not be comparable
to other rates.
To determine the rating, Moody's also conducted a cash flow
analysis by adding stress consistent with the assigned rating on parameters
such as the expected default rate.
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 originator's or the trustee's
bankruptcy is sufficiently minimized to achieve the rating assigned.
Moody's considers the originator sufficiently capable of servicing the
pool, after having taken into account the originator's business
experience and the servicing operations.
The principal methodology used in this rating was "Moody's
Global Approach to Rating Auto Loan- and Lease-Backed ABS"
(Japanese) published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1236205.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Please note that a Request for Comment was published in which Moody's
requested market feedback on potential revisions to one or more of the
methodologies used in determining these Credit Ratings. If the
revised methodologies are implemented as proposed, it is not currently
expected that the Credit Ratings referenced in this press release will
be affected.
Request for Comments can be found on the rating methodologies page on
www.moodys.com.
Factors That Would Lead to an Upgrade or Downgrade of the Rating:
The primary factor that could lead to a downgrade of the rating is worse
performance of the underlying assets than Moody's expected.
Moody's has also conducted the sensitivity analysis below which
provides the number of notches by which the model-indicated output
of the deal would have varied if different assumptions had been made as
to certain key model parameters. The analysis assumes that the
deal has not aged.
If the expected default rate was changed from 2.5% to 3.75%
and 6.25% and other assumptions remained unchanged,
the model-indicated output of ABL would change by 0 and 1 notch
respectively.
The analysis results are model-indicated outputs, which are
one of the many quantitative and qualitative factors considered by rating
committees in determining actual ratings. This analysis does not
intend to measure how the rating of the deal might migrate over time,
but rather, how the initial model-indicated output of the
deal might have differed if certain key model parameters had been varied.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of consumer assets from the
current weak Japanese economic activity and a gradual recovery for the
coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
In rating this transaction, Moody's used a cash flow model
to model cash flow stress scenarios to determine the extent to which investors
would receive timely payments of interest and principal in the stress
scenarios, given the transaction structure and collateral composition.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Moody's SF Japan K.K. is a registered credit rating agency
under the Financial Instrument and Exchange Act but not a Nationally Recognized
Statistical Rating Organization ("NRSRO"). Therefore the credit
ratings assigned by Moody's SF Japan K.K. are Registered
Credit Ratings to the FSA, but are not NRSRO Credit Ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Atsushi Karikomi
VP - Senior Credit Officer
Structured Finance Group
Moody's SF Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4220
Client Service: 81 3 5408 4210
Yusuke Seki
Associate Managing Director
Structured Finance Group
JOURNALISTS: 81 3 5408 4220
Client Service: 81 3 5408 4210
Releasing Office:
Moody's SF Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4220
Client Service: 81 3 5408 4210
