JPY 21.6 billion in Beneficial Interests and ABL affected
Tokyo, January 27, 2011 -- Moody's Japan K.K. has assigned provisional ratings to MDF
Auto Credit Trust Series 6, 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.
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 ratings are based on information received
as of January 26, 2011.
The complete rating actions follow:
Deal Name: MDF Auto Credit Trust Series 6
Class, Dividend/Interest Rate, Rating
Class A Beneficial Interests, Fixed, (P)Aaa (sf)
Class B Beneficial Interests, Fixed, (P)Aaa (sf)
Class A ABL2, Fixed, (P)Aaa (sf)
Class B ABL2, Fixed, (P)Aaa (sf)
Scheduled Total Issue Amount: JPY 21.6 billion
Payment Frequency: Monthly
Scheduled Entrustment Date (First Trust): February 15, 2011
Scheduled Entrustment Date (Second Trust): February 25, 2011
Scheduled Transfer Date of Beneficial Interests / Loan Funding Date:
February 25, 2011
Final Maturity Date/Final Payment Date: February 25, 2018
Underlying Asset: Auto loan receivables
Total Amount of Receivables: JPY 26,482,210,009
(JPY 23,001,370,719 in principal)
Backup Servicer: MCS Servicer Co., Ltd.
ABL1 Lender/ Seller (Second Trust): Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd. ("MUMSS")
Asset Trustee (First Trust)/Asset Trustee (Second Trust): Mitsubishi
UFJ Trust and Banking Corporation ("MUTB")
Arranger: MUMSS
RATING RATIONALE
The Seller, being both originator and initial servicer, will
entrust a pool of its auto loan receivables to MUTB ("First Asset
Trustee"), which will then issue the Class A and B Senior
Beneficial Interests (collectively, "Senior Beneficial Interests"),
Subordinated Beneficial Interests and Cash Reserve Beneficial Interests.
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 First Asset Trustee will receive the Class A and B limited recourse
loan 1 (collectively, "ABL1") from MUMSS as the initial
lender. The proceeds will be used to redeem the Senior Beneficial
Interest in full. The Seller will retain the Subordinated Beneficial
Interests and the Cash Reserve Beneficial Interests.
The initial lender will entrust the ABL1 to MUTB ("Second Asset
Trustee") and receive the Class A Beneficial Interests and the Class
B Beneficial Interests (collectively, "Beneficial Interests").
Entrustment of the ABL1 will be perfected against relevant obligors and
third parties by obtaining the First Asset Trustee's dated,
certified approval in writing, and pursuant to the rules under Article
467 of the Civil Law.
The Second Asset Trustee will receive the Class A and B limited recourse
loan 2 (collectively, "ABL2") from the ABL Investors.
The Second Asset Trustee will use the proceeds to redeem a portion of
the Beneficial Interests.
The Beneficial Interests (excluding the portion redeemed by the ABL2)
will be transferred to the Beneficial Interests Investors. 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 comprises approximately
6.1% of the initial principal balance of the receivables.
The Beneficial Interests and the ABL2 will be redeemed in a scheduled
monthly amortization or on a monthly pass-through basis.
Defaulted receivables in the underlying pool (excluding the receivables
the seller repurchases) will be used as payment in kind to redeem 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 accelerated amortization events occur, the dividend waterfall
to the Subordinated Beneficial Interests will be suspended, and
excess spread will be used to redeem the ABL1. Key accelerated
amortization events include a servicer replacement event occurring or
an asset performance trigger being reached.
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 ABL1, trust fees, and fees relating
to start back-up servicer operations, etc. If any
servicer replacement events occur, the First Asset Trustee can dismiss
the Servicer. A back-up servicer will be appointed at closing.
Commingling risk is covered by the servicer's advance payment of
collections from the underlying assets.
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 2.3%, 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, and available on www.moodys.co.jp.
Moody's did not receive or take into account a third-party
due diligence report 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 3.4% or 3.9%, the model
output for the Beneficial Interests and the ABL2 would be Aa1 or 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.
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.
A profile of the originator follows:
Business sector: Financial industry
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
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
Shinichiro Kan
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 provisional ratings to MDF Auto Credit Trust Series 6
