JPY 42.6 billion of trust certificates rated
Tokyo, February 10, 2011 -- Moody's Japan K.K. has assigned provisional ratings
of (P)Aaa (sf) to the Class A1 and A2 Sumitomo Trust Bank Series 6 Residential
Mortgage-Backed Trust Certificates (the "Senior Trust Certificates")
totaling JPY 42.6 billion. The Senior Trust Certificates
are backed by a pool of residential mortgage loans originated by The Sumitomo
Trust and Banking Co., Ltd.
The ratings address the expected loss posed to investors by the final
maturity date. The transaction's structure allows for timely payments
of dividends (in scheduled amounts, on scheduled payment dates)
and full repayment of principal by the final maturity date.
Moody's issues provisional ratings in advance of the final sale of the
securities. These ratings, however, only represent
Moody's preliminary credit opinions. Upon a conclusive review of
the transaction and associated documentation, Moody's will endeavor
to assign definitive ratings to the Investor's Beneficial Interests.
Definitive ratings may differ from provisional ratings. The provisional
ratings are based on the information received as of February 9,
2011.
The complete rating actions are as follows:
Transaction Name: Sumitomo Trust Bank Series 6 Residential Mortgage-Backed
Trust Certificates
Class, Issue Amount, Scheduled Dividend Rate, Payment
Frequency, Rating
Class A1 Senior Trust Certificates, JPY 24.6 billion,
Fixed, Monthly, (P)Aaa (sf)
Class A2 Senior Trust Certificates, JPY 18.0 billion,
Fixed, Monthly, (P)Aaa (sf)
Credit Enhancement: Over-collateralization provided by the
senior/subordinated structure
Subordination:
Class A1: Approx. 46.6%
Class A2: Approx. 7.5%
* The formula used to calculate the Subordination in place for this
transaction is
Subordination = A / B, where A equals the total principal
amount of the Trust Certificates subordinated to the subject Trust Certificates
and B equals the initial outstanding balance of the residential mortgage
loan pool.
Expected Entrustment Date: March 11, 2011
Expected Closing Date: March 16, 2011
Final Maturity Date: The end of December 2051
Underlying Asset: Residential mortgage loans
Originator/Seller/Servicer: The Sumitomo Trust and Banking Co.,
Ltd. ("Sumitomo Trust Bank," Aa3/P-1)
Asset Trustee: The Norinchukin Trust and Banking Co.,
Ltd. ("Norinchukin Trust Bank")
Arranger: Sumitomo Trust Bank
RATING RATIONALE
The obligors consist mainly of salaried workers and civil servants with
fairly high income, and most of the collateral properties are located
in the Tokyo or Osaka metropolitan areas. Having analyzed both
obligor attributes and Sumitomo Trust Bank's historical performance,
Moody's estimates a cumulative gross loss rate of 2.3%
in the pool. Moody's believes that the credit enhancement
for each of the Class A1 and A2 Senior Trust Certificates is sufficient
to assign the transaction a rating of Aaa.
The Seller, Sumitomo Trust Bank will entrust a pool of its residential
mortgage loans and cash to the Asset Trustee, Norinchukin Trust
Bank. In turn, the Seller will receive the Class A1 and A2
Senior Trust Certificates, the Reserve Trust Certificates,
and the Subordinated Trust Certificates. The Seller will sell the
Class A1 and A2 Senior Trust Certificates to the investors, but
retains the Reserve Trust Certificates and Subordinated Trust Certificates.
The Seller will act as Servicer, under the Servicing Agreement with
the Asset Trustee. The transaction does not have a third-party
Back-up Servicer in place that can take over actual servicing operations.
However, the Asset Trustee has the right to appoint an eligible
Servicer (Back-up Servicer) by entering into a new servicing agreement
if any back-up servicer preparation trigger events occur.
Principal redemption will be made in a sequential manner. Interest
collections (after paying expenses and dividends) will be transferred
to the Principal Account up to the aggregate amount of outstanding balance
of defaulted loans and modified loans (under the Act concerning Temporary
Measures to Facilitate Financing for SMEs, etc.) excluding
the aggregate amount of these loans which are repurchased by the Seller.
A cash reserve will be funded up front to provide liquidity for shortages
in scheduled payments of the Senior Trust Certificates as well as trust
fees, servicing fees and so forth. Set-up fees for
a Back-up Servicer and cash reserves for set-off and commingling
risk will be funded after certain trigger events occur.
The Originator/Seller/Servicer, The Sumitomo Trust and Banking Co.,
Ltd., headquartered in Osaka, is a major Japanese trust
bank, and was established in 1925. It has branch offices
in principal cities nationwide, mainly in the Tokyo metropolitan
and Keihan areas. As of September 2010, the bank had consolidated
capital of about JPY342.0 billion, with 51 offices in Japan
and four overseas offices. The number of employees totaled 6,096.
Sumitomo Trust Bank has announced that it will integrate with Chuo Mitsui
Trust Holdings, Inc. in April 2011. Moody's conducted
an on-site review with Sumitomo Trust Bank, focusing on its
business franchise as originator and its underwriting criteria.
Moody's also reviewed the bank's operations as servicer and considers
it sufficiently capable of servicing the pool.
The principal methodology used in this rating was "Updated:
Moody's Approach to Rating RMBS Transactions in Japan" 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 indicates "Low/Medium" uncertainty
about critical assumptions, in line with the Low/Medium score for
the Japanese RMBS(Conforming) sector. The V Score reflects 1) the
Seller's long track record of residential mortgages, 2) the historically
low volatility in its performance, and 3) the disclosure of information
for analysis, as well as 4) the characteristics of the transaction.
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability around the various inputs
to a rating determination. The V Score ranks transactions by the
potential for significant rating changes owing to uncertainty around the
assumptions due to data quality, historical performance, the
level of disclosure, transaction complexity, the modeling
and the transaction governance that underlie the ratings. V Scores
apply to the entire transaction, not to individual tranches.
Moody's also ran sensitivity analyses for key parameters for this transaction.
For instance, if the cumulative gross loss rate of 2.3%
used in determining the initial rating were changed to 6.9%
or 9.6%, the model output for the Class A1 would not
be change, but the rating for the Class A2 would change from Aaa
to Aa1 or to 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, "V Scores and Parameter Sensitivities in the Asia/Pacific
RMBS Sector", published on September 30, 2010, is available
on 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, loan-by-loan data, and contracts.
Information sources used to prepare the credit rating are the following
parties involved in the ratings such as the Arranger and the Originator;
public information, 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.
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 disclose
the related information pertinent to this transaction through Moody's
press release and its presale report.
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
Nagisa Sugimura
Associate 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 Sumitomo Trust Bank Series 6 RMBS
