JPY12.5 billion in ABL affected
Tokyo, February 25, 2011 -- Moody's Japan K.K. has assigned a provisional rating to
Neptune Lease Trust 2011-1, amounting to JPY 12.5
billion, backed by lease receivables.
The ratings address 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.
Moody's issues provisional ratings in advance of the final sale of securities.
These ratings, however, represent Moody's preliminary credit
opinions only. Upon a conclusive review of the transaction and
associated documentation, Moody's will endeavor to assign definitive
ratings to the securities. Definitive ratings may differ from provisional
ratings. The provisional rating is based on information received
as of February 24, 2011.
The complete rating actions follow:
Deal Name: Neptune Lease Trust 2011-1
ABL, rated (P)Aaa (sf)
Scheduled ABL Amount: JPY 12.5billion
Interest Rate: Fixed
Payment Frequency: Monthly
Scheduled Entrustment Date: March, 2011
Scheduled ABL Funding Date: March, 2011
Revolving Period: from March 2011 to March, 2013
Final Maturity Date: March 20, 2021
Underlying Asset: Lease receivables
Arranger: GE Japan Corporation
RATING RATIONALE
The seller, being both originator and initial servicer, will
entrust a pool of its lease receivables to the asset trustee, who
will then issue a trust beneficial interest. Entrustment of the
receivables will be 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 asset trustee will receive a limited recourse loan (the ABL) from
the ABL lender, the proceeds of which will be used to redeem a portion
of the trust beneficial interest. The ABL will be senior to the
trust beneficial interest. The seller will retain the trust beneficial
interest.
Credit enhancement is provided by the senior/subordinated structure and
available excess spread. Subordination (excluding that corresponding
to a cash reserve) comprises approximately 16.5% of the
initial principal balance of the receivables. The level of credit
enhancement may change, depending on the interest rate with regard
to the ABL and the securitized pool.
The ABL will be redeemed through pass-through amortization after
a two-year revolving period. Defaulted receivables in the
underlying pool will be used as payment in kind for dividends on the trust
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)
If any early amortization events occur, the dividend waterfall to
the trust beneficial interest will be suspended, and excess spread
will be used to redeem the ABL.
In preparation for servicer replacement, liquidity will be provided
in the form of a cash reserve at closing. This reserve will cover
interest payments on the ABL, trust fees, and fees relating
to start of back-up servicer operations, etc. If any
servicer replacement events occur, the asset trustee can dismiss
the servicer. A back-up servicer will be appointed at closing.
Commingling risk is covered by the trust 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 1.4%, taking into consideration the receivables'
attributes, historical data on the receivables' 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 seller's or the 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 lease industry.
The principal methodology used in this rating was "Moody's Approach
to Rating Securitizations of Lease Receivables in Japan" 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, the same score assigned
to the Japanese lease receivables ABS sector. Moody's has not assigned
ratings to securitization programs originated by the seller, although
the seller has securitized receivables for ten years. The structure
of this transaction is a common one, and the level of complexity
is similar to that of a typical lease receivables ABS. In Moody's
view, structural features such as revolving periods have a limited
impact on V scores.
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 1.9% or 2.4%, the model
output for the ABL in these two scenarios would be zero notches down (Aaa)
for a 1.9% default rate, and one notch down (Aa1)
for a 2.4% 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, is available on www.moodys.co.jp.
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 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 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.
A profile of the originator follows:
Business sector: Commercial finance business, real estate
business, and management and operation services for group companies
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 will not
disclose information pertinent to this transaction to third parties except
through Moody's press release. However, they will disclose
information pertinent to this transaction to their investors who will
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.
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 provisional rating to Neptune Lease Trust 2011-1
