JPY 27.9 billion in Investor Beneficial Interests and Investor ABL affected
Tokyo, December 28, 2010 -- Moody's Japan K.K. has assigned definitive ratings to 201012_Installment
Sales Receivables and Lease Receivables Securitization, amounting
to JPY 27.9 billion, backed by installment sales receivables
and lease 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) and interest,
and ultimate payment of principal by the final maturity date.
The complete rating actions follow:
Deal Name: 201012_Installment Sales Receivables and Lease Receivables
Securitization
Class, Issue Amount, Rating
Class A Investor Beneficial Interests, JPY15.4 billion,
rated Aaa (sf)
Investor ABL, JPY12.5 billion, rated Aaa (sf)
Total Issue Amount: JPY27.9 billion
Scheduled Dividend /Interest Rate: Fixed
Payment Frequency: Monthly
Entrustment Date: December 22, 2010
Transfer Date of Class A Investor Beneficial Interests/
Investor ABL Funding Date: December 28, 2010
Final Maturity Date/Final Payment Date: June 25, 2018
Underlying Asset: Installment sales receivables and lease receivables
Total Principal Amount of Receivables (as of the end of November,
2010): JPY 34,911,564,229
Arrangers: Shinsei Securities Co., Ltd.,
Development Bank of Japan Inc.
RATING RATIONALE
The seller, being both originator and initial servicer, entrusted
a pool of its installment sales receivables and lease receivables to the
first trustee, who then issued a Senior Beneficial Interest and
a Subordinated Beneficial Interest. Entrustment of the receivables
was 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 trustee received a limited recourse loan (the Trust ABL) from
the initial lender, the proceeds of which was used to redeem the
Senior Beneficial Interest in full. The seller will retain the
Subordinated Beneficial Interest.
The initial lender entrusted the Trust ABL to the second trustee and received
the Class A and B Investor Beneficial Interests. Entrustment of
the Trust ABL was perfected against relevant obligors and third parties
by obtaining the first trustee's dated, certified approval
in writing pursuant to the rules under Article 467 of the Civil Law.
The Class A Investor Beneficial Interests was transferred to investors.
The transfer was perfected against relevant obligors and third parties
under Article 94 of Japan's Trust Law. The Class B Investor
Beneficial Interest was redeemed in full by a limited-recourse,
asset-backed loan (the Investor ABL) which the ABL investors extended
to the second trustee.
The interest on and principal redemption of the Trust ABL will be used
to pay the dividends and interest and redeem the Class A Investor Beneficial
Interests and the Investor ABL. The Trust ABL will be redeemed
in a monthly, sequential, pass-through basis.
Credit enhancement is provided by the senior/subordinated structure and
available excess spread. Subordination (excluding that corresponding
to a cash reserve) comprises approximately 20.1% of the
initial principal balance of the receivables.
If any early amortization events occur, the dividend waterfall to
the Subordinated Beneficial Interest will be suspended, and excess
spread will be used to redeem the Trust ABL. Key early amortization
events include a servicer replacement event occurring and the accumulated
default amount exceeding its trigger threshold.
In preparation for servicer replacement, liquidity is provided in
the form of a cash reserve at closing. This reserve will cover
interest payments on the Trust ABL, trust fees, and fees relating
to start of back-up servicer operations, etc. If any
servicer replacement events occur, the first trustee can dismiss
the Servicer and have the back-up servicer take over as Servicer.
A back-up servicer is appointed at closing.
Commingling risk is covered by the Subordinated Beneficial Interest.
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 1.99%, taking into consideration the receivables'
attributes, historical data on the receivables' 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 by adding 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 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 lease industry.
The principal methodology used in this rating was "Moody's Approach
to Rating Securitizations of Lease Receivables in Japan" 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
in this transaction.
The V score for this transaction is Low/Medium, the same score assigned
to the Japanese lease receivables ABS sector. Moody's has assigned
ratings to securitizations of lease receivables originated by the seller
for the past ten years. The underlying assets include installment
sales receivables. Moody's was informed that installment
sales receivables and lease receivables are managed in accordance with
same credit and collection policies. Moody's had previously
-- in 2003 -- assigned a rating to a securitization
backed by the same underlying assets originated by the seller.
The structure of this transaction --e.g., the
waterfall -- is a common one, and the level of complexity
is similar to that of a typical lease receivables 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 3.0% or 4.0%, the model
output for Class A Investor Beneficial Interests and Investor ABL in these
two scenarios would be 1 notch down(Aa1) for a 3.0% default
rate, and 2 notches down(Aa2) for a 4.0% 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 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, is 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 would not
disclose information pertinent to this transaction to third parties except
through Moody's press release. However, they would
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
Masafumi Hirai
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 rates 201012_Installment Sales Receivables and Lease Receivables Securitization
