Class C through I Trust Certificates affected
Tokyo, March 01, 2011 -- Moody's Japan K.K. has today changed its ratings on the
L-JAC III Class C through I trust certificates.
Details follow:
Class C Certificate, downgraded to Ba2 (sf); previously on
Feb 3, 2011 Baa2 (sf) placed under review for possible downgrade
Class D-1 Certificate, downgraded to B2 (sf); previously
on Feb 3, 2011 Ba2 (sf) placed under review for possible downgrade
Class E-1 Certificate, downgraded to B3 (sf); previously
on Feb 3, 2011 Ba3 (sf) placed under review for possible downgrade
Class F-1 Certificate, downgraded to Caa1 (sf); previously
on Feb 3, 2011 B1 (sf) placed under review for possible downgrade
Class G-1 Certificate, downgraded to Caa2 (sf); previously
on Feb 3, 2011 B2 (sf) placed under review for possible downgrade
Class H-1 Certificate, downgraded to Caa3 (sf); previously
on Feb 3, 2011 B3 (sf) placed under review for possible downgrade
Class I Certificate, downgraded to Caa3 (sf); previously on
Feb 3, 2011 B3 (sf) placed under review for possible downgrade
Deal Name: L-JAC III Trust
Class: Class A through I, X-1, and X-2
trust certificates
Issue Amount (initial): JPY70,889 million
Dividend: Floating
Issue Date (initial): October 12, 2006
Final Maturity Date: April, 2013
Underlying Asset (initial): Seven non-recourse loans backed
by real estate
Originator: New Century Finance Co., Ltd.,
(as of the issue date)
Arranger: Lehman Brothers Japan Inc. (as of the issue date)
L-JACIII Trust, effected in October 2006, represents
the securitization of seven loans backed by real estate. The Originator
entrusted the loans to the Asset Trustee, and received the Class
A through I, X-1 and X-2 trust certificates,
which it then sold through the Arranger to investors.
The trust certificates are rated by Moody's.
In this transaction, the interest and principal payments from the
underlying loans are made sequentially.
Six of the seven loans have been paid down in full thus far. The
transaction is now secured by one loan backed by a retail property in
suburban Tokyo, which will mature in March 2011.
RATING RATIONALE
The owner of the underlying property and the property's only tenant
are in a legal dispute over the rent and terms of the lease. Moody's
has re-considered its rent estimates based on scenarios such as
a settlement out of court or the judgement by court. Moody's
then re-assessed its recovery stress assumptions, which it
decreased 47% from its initial assumption.
The current rating action reflects Moody's growing concern about
the deterioration of credit support on the Class C through E-1,
and the likelihood of losses on the Class F-1 through I,
trust certificates as a result of the re-assessed recovery rate.
Although the credit support for the Class A has risen, Moody's
continues to monitor the dispute.
The principal methodology used in this rating was "Updated: Moody's
Approach to Rating CMBS Transactions in Japan" (June 2010) published on
September 30, 2010, and available on www.moodys.co.jp.
Moody's did not receive or take into account any third party due diligence
reports on the underlying assets or financial instruments related to the
monitoring of this transaction in the past six months.
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 included servicer
reports and trustee reports.
Information sources used to prepare the credit rating came the following:
parties involved in the ratings (such as the arranger), parties
not involved in the ratings (such as the servicer), public information,
confidential and proprietary Moody's information.
Measures taken to ensure the quality of this information include preparation
or reviews by a third party.
Moody's considers the quality of information available on the issuer or
obligation satisfactory for the purposes of maintaining a credit rating.
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
Takahiro Okubo
Vice President - Senior Analyst
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Tokyo
Koji Kumamaru
MD - Structured Finance
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's downgrades L-JAC III Trust Certificates (CMBS)