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21 Oct 2009
JPY 91.9 Billion commitment line affected
Tokyo, October 21, 2009 -- Moody's Investors Service has confirmed the ratings of Pegasus Funding's
Class A1 and A2 loans. The commitment line was established in September
2006 and is backed by a pool of loans to small and medium-sized
enterprises, secured by real estate.
The complete rating actions follow:
Deal Name: Pegasus Funding
Class A1, Confirmed at Baa2; previously on May 13, 2009,
Downgraded to Baa2 from A2, and Remained On Review for Possible
Class A2, Confirmed at Baa2; previously on May 13, 2009,
Downgraded to Baa2 from A2, and Remained On Review for Possible
The rating actions reflect mainly information that Moody's has obtained
on the progress of the servicers' operations and their servicing policy.
The initial servicer of this transaction filed for civil rehabilitation
proceedings in the Tokyo District Court on February 23, 2009.
On March 24, 2009, the court terminated the civil rehabilitation
proceedings. Then, on April 21, 2009, the court
ordered the company to commence bankruptcy proceedings. At that
point, a newly appointed servicer started servicing and special
servicing all the loan receivables in the transaction; it also started
preparing for full-scale collections from the collateral properties.
On May 13, 2009, Moody's downgraded the ratings of the Class
A1 and A2 loans to Baa2 from A2, having revised two of its assumptions
to the following: (1) most obligors were considered as having defaulted,
and no payments from obligors were to be expected; and (2) the assumed
recovery rate from the disposal of collateral properties was lowered.
(The average recovery rate on the loan was lowered to 50-60%,
from the initial 60-70%.)
The assumptions were revised for the following reasons: 1) payments
from SME obligors on the loans continued to worsen, with no sign
of improvement; thus, most of the securitized loans had become
delinquent on either principal or interest payments; 2) because of
the slowdown in the real estate market in Japan, the liquidation
of the properties was taking longer, while prices also remained
under stress. In Moody's view, a recovery in the real
estate market in the near term cannot be expected.
At the same time, Moody's believed that the progress of the servicer's
operations should be monitored, and thereby announced the continuation
of its review of the ratings for possible downgrade.
After the previous rating actions, an additional special servicer
was appointed. Moody's considers this additional appointment positive
because the number of the collateral properties in the transaction is
relatively high and because the additionally appointed special servicer
has sufficient experience and expertise to conduct the special servicing.
Moody's received an explanation of the servicing policy for the collateral
properties, following the launch by the servicer and special servicers
for full-scale collection activities after the rating actions in
May. Investor approval will be required for each sale, and
almost all of the properties are to be sold voluntarily.
Moody's has also received detailed information on the servicing,
including appraisals for each property by the special servicer and the
actual results of servicing. Although the total amount of the appraisals
is slightly lower than Moody's assumed collection amount,
the rating agency believes that these appraisals are conservative for
the following reasons: 1) the appraisals are based on the premise
that the collateral properties will be sold at the present moment,
when prices of the properties are under stress. 2) thus far,
the appraisals have been much lower than actual bid prices.
As of end-September, 2009, the deal comprised approximately
140 obligors and 530 properties.
In view of this information and the amount of time to final maturity,
Moody's is not revising at this time the assumed recovery rate for the
collateral properties from the rate applied in the previous rating action.
Moody's believes that the current credit enhancement is sufficient to
maintain a Baa2 rating and has confirmed the rating. The final
maturity of the transaction is December 2014.
Moody's continues to monitor the actual results of servicing from the
collateral properties and credit enhancement levels. Also,
the deal currently comprises a certain amount of funds in a cash reserve
for liquidity, the level of which should be monitored.
The principal methodology used in rating the transaction was "Transactions
Backed by Real Estate Collateralized SME Loans in Japan: Focal Points
in Rating Analysis," published in July 2008, which can be
found at www.moodys.com in the Research & Ratings directory,
in the Rating Methodologies subdirectory. Other methodologies and
factors that may have been considered in the process of rating this issue
can also be found in the Rating Methodologies subdirectory.
Moody's Investors Service is a publisher of rating opinions and research.
It is not involved in the offering or sale of any securities, nor
is it acting on behalf of the offering party. This release is not
a solicitation or a recommendation to buy, hold, or sell securities.
Asst Vice President - Analyst
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's confirms ratings for Pegasus Funding's SME-loan ABS
VP - Senior Credit Officer
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
No Related Data.
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