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Rating Action:

Moody's assigns provisional ratings to AURORA Series1309, credit card receivables ABS

Global Credit Research - 27 Aug 2013

JPY 4.5 billion in Debt Securities affected

Tokyo, August 27, 2013 -- Moody's SF Japan K.K. has assigned provisional ratings to the AURORA Series1309 ABS, backed by credit card receivables.

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.

The ratings address the expected loss posed to investors by the final maturity date. The structure allows for timely payments of interest (dividend) 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 complete rating action is as follows:

Transaction Name: AURORA Series1309

Class, Scheduled Dividend/Interest Rate, Rating

Series1309 Beneficial Interests, Fixed, (P)Aaa (sf)

Series1309 Trust ABL, Fixed, (P)Aaa (sf)

Total Issue Amount: JPY 4.5 billion

Closing Date: September 26, 2013

Final Maturity Date: August 31, 2020

Underlying Asset: Credit card receivables (cash advance receivables and card purchase receivables)

Total Amount of Receivables (Principal Amount): JPY 17,465,420,439

Arranger: Mizuho Securities Co., Ltd.

RATINGS RATIONALE

The seller, being both originator and initial servicer, entrusts a pool of eligible credit card receivables and cash to the asset trustee, who then issues the Series1309 Beneficial Interests ("Series Beneficial Interests"), the Subordinated Beneficial Interests, the Seller's Beneficial Interests, and the Reserve Beneficial Interests.

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

The asset trustee receives a limited recourse loan (Series1309 Trust ABL, hereafter "Series Trust ABL") from the investors. The funds are used to redeem a part of the Series Beneficial Interests.

The rest of Series Beneficial Interests is transferred to the investors. The transfer is perfected against the relevant obligors and third parties under Article 94 of Japan's Trust Law.

The seller holds the Subordinated Beneficial Interests, the Seller's Beneficial Interests and the Reserve Beneficial Interests.

Credit enhancement is provided by the senior/subordinated structure and available excess spread. Subordination comprises approximately 16.8% of the initial principal balance of the Series Beneficial Interests, the Series Trust ABL and the Subordinated Beneficial Interests at the closing date.

The transaction does not have a revolving period and the Series Beneficial Interests and the Series Trust ABL are redeemed in a monthly, scheduled amortization. If the Subordinated Beneficial Interests amount exceeds the required amount and certain conditions are met, then the "excessive" portion can be transferred to the seller's portion.

Defaulted receivables in the underlying pool are used as payment in kind for dividends on the Subordinated Beneficial Interests, while cash in an amount equivalent to the principal balance of the defaulted receivables is transferred from the interest collection account to the principal collection account (defaulted trapping mechanism).

Additional enhancement is built up in accordance with the deterioration in the performance of the pool through a dynamic reserve mechanism.

If any early amortization events occur, the dividend waterfall to the Subordinated Beneficial Interests in the series is suspended, and the excess spread is used to redeem the Series Beneficial Interests and the Series Trust ABL. Key early amortization events include the default rate exceeding its trigger level.

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 the dividend payments on the Series Beneficial Interests, the interest payments on the Series Trust ABL, trust fees, and fees relating to start back-up servicer operations, etc.

Commingling risk is covered by the Seller's Beneficial Interests and advance payment of collections.

The ratings are 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 4.6%, after taking into consideration receivable attributes, historical data on the seller's entire pool, performance data on existing securitization pools, and industry trends.

Moody's also believes that the base scenario of the monthly principal payment rate is at approximately 6% and the annual yield at approximately 15.6%. (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 these parameters.

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 Approach To Rating Credit Card Receivables-Backed Securities," published in April 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The V Score for this transaction is Low/Medium, the same score assigned to the Japanese Credit Card Cash Advance ABS sector.

The seller has approximately 10 years of experience in credit card receivables securitizations. The structure of this transaction -- e.g., the waterfall -- is a common one, and the level of complexity is similar to that of a typical Credit Card Cash Advance ABS.

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's annualized expected default rate used in determining the initial rating were changed to 6.5% or 8.3%, the model output for the Series Beneficial Interests and the Series Trust ABL in these two scenarios would be Aa1 and Aa2 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 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.

REGULATORY DISCLOSURES

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction.

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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 SF Japan K.K. is a credit rating agency registered with the Japan Financial Services Agency and its registration number is FSA Commissioner (Ratings) No. 3. The Financial Services Agency has not imposed any supervisory measures on Moody's SF Japan K.K. in the past year.

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
Vice President - Senior Analyst
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: (03) 5408-4220
SUBSCRIBERS: (03) 5408-4210

Yusuke Seki
Associate Managing Director
Structured Finance Group
JOURNALISTS: (03) 5408-4220
SUBSCRIBERS: (03) 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: (03) 5408-4220
SUBSCRIBERS: (03) 5408-4210

Moody's assigns provisional ratings to AURORA Series1309, credit card receivables ABS
No Related Data.

Copyright 2014 Moody's Japan K.K., Moody's SF Japan K.K. and/or their licensors and affiliates (collectively, " MOODY'S"). All rights reserved.


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