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Rating Action:

Moody's assigns definitive rating to OSCAR 2018-1 backed by auto loan receivables

 The document has been translated in other languages

23 Mar 2018

JPY0.5 billion in Debt Securities affected

Tokyo, March 23, 2018 -- Moody's Japan K.K. has assigned a definitive rating to the OSCAR 2018-1 transaction, which is backed by auto loan receivables.

The rating addresses the expected loss posed to investors by the final maturity date. The structure allows for timely payments of interest and ultimate payment of principal by the final maturity date.

The complete rating action is as follows:

Transaction Name: OSCAR 2018-1

Class, Issue Amount, Scheduled Dividend Rate, Final Maturity Date, Rating

A-5 Senior Beneficial Interests, JPY0.5 billion, Fixed, April 25, 2025, Aaa (sf)

Closing Date: March 23, 2018

Underlying Asset: Auto loan receivables

Total Amount of Receivables: JPY59,820,973,471 (JPY51,703,331,766 in principal)

Seller (Originator/Initial Servicer): Orient Corporation

Asset Trustee: Mizuho Trust & Banking Co., Ltd.

Arranger: Mizuho Securities Co., Ltd. ("MHSC")

Initial Lender: MHSC

RATINGS RATIONALE

The seller, being both originator and initial servicer, entrusts a pool of its auto loan receivables to the asset trustee. The asset trustee then issues the A-1 through A-5 Senior Beneficial Interests, the Mezzanine Beneficial Interests and the Subordinated Beneficial Interests.

Entrustment of the receivables is perfected against third parties under the Perfection Law. Perfection against obligors is not made unless certain events occur.

The seller transfers the A-1 through A-4 Senior Beneficial Interests (collectively "Senior Beneficial Interests"), the A-5 Senior Beneficial Interests and the Mezzanine Beneficial Interests to investors. The transfer is perfected against the relevant obligors and third parties under Article 94 of Japan's Trust Law. The seller retains the Subordinated Beneficial Interests.

The asset trustee receives limited recourse loans (A-1 through A-4 ABL (collectively "Senior ABL"), and the Mezzanine ABL) from the initial lender. The proceeds are used to redeem the Senior Beneficial Interests and the Mezzanine Beneficial Interests.

Credit enhancement is provided by the senior/subordinated structure and available excess spread. Subordination (excluding that corresponding to a cash reserve) comprises approximately 7.94% of the total initial principal balance of the receivables.

The Senior ABL and the A-5 Senior Beneficial Interests are redeemed in a scheduled monthly amortization on a sequential basis. The Mezzanine ABL and Subordinated Beneficial Interests are redeemed under certain conditions. The A-2a/b through A-4 ABL and A-5 Senior Beneficial Interests are structured pari-passu in the principal and interest waterfall under a certain condition.

If any early amortization events occur, the dividend waterfall to the Mezzanine ABL and the Subordinated Beneficial Interests is suspended, and excess spread is used to redeem the Senior ABL and the A-5 Senior Beneficial Interests. Key early amortization events include a servicer replacement event occurring, or asset performance triggers being reached.

If any servicer replacement events occur, the asset 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 interest/scheduled dividend payments on the Senior ABL and the A-5 Senior Beneficial Interests, trust fees, and fees relating to the start of back-up servicer operations, etc.

The interest on the Mezzanine ABL is deferrable and it will not receive liquidity support either from principal collections or from a cash reserve to cover temporary shortfalls.

Commingling risk is covered in full by the junior tranches for the Senior ABL and the A-5 Senior Beneficial Interests.

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 approximately 0.70% (Cumulative expected default rate: approximately 1.49%, Aaa credit enhancement: approximately 8.08%), after taking into consideration the receivable attributes, historical data on the seller'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 has also conducted a cash flow analysis in which it added 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 seller's or the asset trustee's bankruptcy is sufficiently minimized to achieve the rating assigned.

Moody's considers the seller sufficiently capable of servicing the pool, after having taken into account the seller'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 October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to a 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.

If the transaction's annualized expected default rate used in determining the initial rating were changed to 1.40% or 2.10%, the model output for the A-5 Senior Beneficial Interests in these two scenarios would change to Aaa or to Aa1, respectively (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 transaction 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.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

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 or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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 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.

Yusuke Minaki
Asst Vice President - Analyst
Structured Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Yusuke Seki
Associate Managing Director
Structured Finance Group
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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