JPY 13.0 billion in Senior Beneficial Interests and Trust ABL affected
Tokyo, December 29, 2010 -- Moody's Japan K.K. has assigned definitive ratings to the
NBL-1012 transaction, amounting to totaling JPY 13.0
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
maturity date.
The complete rating actions are as follows:
Deal Name: NBL-1012
Class, Amount, Dividend/Interest, Rating
Class A Senior Beneficial Interests, JPY 5.9 billion,
Fixed, Aaa (sf)
Class B Senior Beneficial Interests, JPY 4.9 billion,
Fixed, Aaa (sf)
Class A Trust ABL, JPY 2.2 billion, Fixed, Aaa
(sf)
Total Issue Amount: JPY 13.0 billion
Payment Frequency: Monthly
Entrustment Date: December 20, 2010
Transfer Date of Senior Beneficial Interests / Loan Funding Date:
December 29, 2010
Final Maturity Date/Final Payment Date: December 25, 2018
Underlying Asset: Auto loan receivables
Total Amount of Receivables (Principal Amount): JPY 16,604,002,345
Seller (Originator/Initial Servicer): Orient Corporation ("Orico",A3)
Trustee: Mizuho Trust & Banking Co., Ltd.
("MHTB")
Arranger/Underwriter: Mizuho Securities Co., Ltd.
("MHSC")
Moody's also had assigned a (P)Aaa (sf) provisional rating to the Class
B Trust ABL on November 26, 2010, and then withdrew it as
the full amount has been procured through the other classes.
RATING RATIONALE
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. The
underlying pool will mainly consist of the loans, which 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 100 billion in New Budget Loans between April 2009 and
September 2010.
This deal's underlying assets includes guaranteed loans with higher
interest rates.
The seller entrusted a pool of its auto loan receivables to the Trustee,
and the Trustee issued the Senior Beneficial Interests (Class A and B
Senior Beneficial Interests) and the 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 unless certain events occur.
The Trustee used the proceeds from a limited recourse loan (Class A Trust
ABL) -- procured from the ABL investors --
to redeem part of the 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 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
21.7% of the total of the total outstanding amount of the
receivables.
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 Interests 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,
or 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, the Trustee can dismiss the Servicer. A back-up
servicer was appointed at closing.
Commingling risk is covered by the Subordinated 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 estimated the annualized expected default rate of the underlying
assets at approximately 2.8%, taking into consideration
receivable attributes, historical data on the seller's entire
pool, performance data on existing securitization pools, and
industry trends. (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 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 examined the seller's operations and considers it
sufficiently capable of servicing the underlying pool as initial servicer,
given its substantial experience in the auto loan industry.
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-September 2010, Orico had total consolidated assets
of approximately JPY 4,342.7 billion and net assets of JPY
193.8 billion. Orico's auto loan receivables (non-consolidated
and including securitized receivables) totaled approximately JPY 1,363.2
billion.
On September 22, 2010, Orico announced that preferred shares
of Orico -- held by Mizuho Bank, Ltd. (MHBK)
and Mizuho Corporate Bank, Ltd. (MHCB) -- were
converted into common shares.
After the conversion, common shares held by Mizuho Financial Group
(MHFG), the holding company of MHBK, MHCB and MHTB,
amounted to a total approximately 27.2%, and Orico
became an equity method affiliate of MHFG.
The principal methodology used in this rating was "Moody's Approach
to Rating Japanese Auto Loan ABS," published on September
30, 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, 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 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 3.5% or 4.5%, the model
output for Senior Beneficial Interests and the Trust ABL in these two
scenarios would be zero notches down (Aaa) for a 3.5% default
rate, and one notches down (Aa1) for a 4.5% 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 methodology, "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 Non-U.S. Vehicle 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.
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 candidate
investors who may invest 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.
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Moody's assigns definitive ratings to NBL-1012 backed by auto loan receivables
