JPY 10.4 billion in Senior Beneficial Interests and Trust ABL affected
Tokyo, October 27, 2010 -- Moody's Japan K.K. has assigned provisional ratings to Axis-1011,
amounting to totaling JPY10.4 billion, backed by auto loan
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
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 October 26, 2010.
The complete rating actions follow:
Deal Name: Axis-1011
Class A Senior Beneficial Interests, rated (P)Aaa (sf)
Class B Senior Beneficial Interests, rated (P)Aaa (sf)
Trust ABL, rated (P)Aaa (sf)
Scheduled Total Issue Amount: JPY10.4 billion
Scheduled Dividend Rate/Interest Rate: Fixed
Payment Frequency: Monthly
Scheduled Entrustment Date: November 9, 2010
Scheduled Transfer Date of Beneficial Interests: November 25,
Scheduled Loan Funding Date: November 25, 2010
Final Maturity Date/Final Payment Date: November 27, 2017
Underlying Asset: Auto loan receivables
Total Amount of Receivables (Principal Amount): JPY11,181,899,716
Trustee: Mizuho Trust & Banking Co., Ltd.
Arranger/Underwriter: Mizuho Securities Co., Ltd.
The seller, being both originator and initial servicer, will
entrust a pool of its auto loan receivables to the asset trustee,
who will then issue the Senior Beneficial Interests (Class A and B Senior
Beneficial Interests) and the Subordinated 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 use the proceeds from a limited recourse loan (Trust
ABL) procured from the ABL investors to redeem a portion of the Class
A Beneficial Interests. The seller will hold the Subordinated Beneficial
Interest and transfer the Class A Senior Beneficial Interests (excluding
the portion redeemed by the Trust ABL) and the Class B Senior Beneficial
Interests to the investors through Mizuho Securities Co.,
Ltd. The transfer will be 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 (excluding that corresponding
to a cash reserve) comprises approximately 7.0% of the initial
principal balance of the receivables.
The Class A Senior Beneficial Interests and the Trust ABL will be redeemed
in a scheduled monthly amortization. The Class B Beneficial Interests
will be redeemed monthly on a pass-through basis. The Subordinated
Beneficial Interest will be redeemed to the extent that the required enhancement
is maintained. Defaulted receivables in the underlying pool will
be 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 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 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 or a breach of asset performance triggers.
In preparation for servicer replacement, liquidity will be 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 Asset Trustee can dismiss the Servicer. A back-up
servicer will be appointed at closing.
Commingling Risk Preparation Events will be defined, to address
commingling risk. If a Commingling Risk Preparation Event takes
place, the seller will make advance payments covering equivalent
to the collections that may be exposed to commingling risk.
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%-1.8%, taking into
consideration 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 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 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.
The principal methodology used in this rating was "Moody's Approach
to Rating Japanese Auto Loan ABS," published on September
30, 2010 on www.moodys.co.jp. In this
rating process, Moody's may have considered other factors.
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, the same score assigned
to the Japanese auto loan ABS sector. Moody's has assigned ratings
to securitizations of auto loan receivables originated by the seller over
the past ten years. The structure of this transaction is a common
one, and the level of complexity is similar to that of a typical
auto loan 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 default rate used in determining the initial rating
were changed to 2.2% or 2.6%, the model
output for Senior Beneficial Interests and Trust ABL would be one notch
down (Aa1) for a 2.2% default rate, and two notches
down (Aa2) for a 2.6% 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 a sequential payment effect. Parameter sensitivities reflect
only the ratings impact of each scenario from a quantitative/model-indicated
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 methodologies, Moody's "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 its website, at www.moodys.com/SFQuickCheck.
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
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 etc.
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: Financial industry
Size of business: More than JPY 100 billion in total assets
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
related information pertinent to this transaction to candidate investors
who may invest in the transaction.
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.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
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 Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
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.
Moody's assigns provisional ratings to Axis-1011 backed by auto loan receivables
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