Class A1, A2, B and C Beneficial Interests affected
Tokyo, January 27, 2011 -- Moody's Japan K.K. has assigned definitive ratings to Class
A1, A2, B and C Beneficial Interests backed by consumer loan
receivables.
The rating addresses 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 ultimate
payment of principal by the final maturity date.
The complete rating actions follow:
Deal Name: Sunshine Trust
Class, Issue Amount, Dividend, Rating
Class A1, JPY158.5 billion, Fixed, A2 (sf)
Class A2, JPY50.9 billion, Fixed, A3 (sf)
Class B, JPY40.8 billion, Fixed, Baa2 (sf)
Class C, JPY13.3 billion, Fixed, Baa3 (sf)
Payment Frequency: Quarterly
Initial Entrustment Date: September 24, 2008
Transfer Date of Class A1 Beneficial Interest: September 24,
2008
Transfer Date of Class A2 Beneficial Interest: January 27,
2011
Transfer Date of Class B Beneficial Interest: September 24,
2008
Transfer Date of Class C Beneficial Interest: August 27, 2010
Final Maturity Date: July 31, 2018
Underlying Asset: Consumer loan receivables
Total Amount of Receivables: JPY 371,078,606,415
Seller/Originator/Initial Servicer: Shinsei Financial Co.,
Ltd.
Arranger: Shinsei Securities Co., Ltd.
The ratings have been assigned based on the amendments of the transaction
entered into on January 27, 2011. Previously, ratings
on the Class A through C of the transaction had been withdrawn,
as detailed in the press release announced earlier.
RATING RATIONALE
The seller entrusted a pool of consumer loan receivables to the asset
trustee, and received the Class A1, Class A2, Class
B, Class C, Class D and Class E Beneficial Interests,
Seller's Beneficial Interest and 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 [Law No.104, 1998]).
Perfection against obligors will not be made until certain events occur.
The seller holds the Seller's Beneficial Interest and the Subordinated
Beneficial Interest and has transferred the Class A1 through C Beneficial
Interests ("the Beneficial Interests") to the investors.
The transfer was perfected against the 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 (for the Class C) comprises
28.6% of the total outstanding amount of the receivables.
The Beneficial Interests will be redeemed in a sequential, monthly,
pass-through basis.
Default receivables will be used as payment in kind for dividends on the
Subordinated Beneficial Interest, while cash in an amount equivalent
to the principal balances of the defaulted receivables will be transferred
from the interest collection account to the principal collection account
(defaulted trapping mechanism).
If an early amortization event occurs, the dividend waterfall to
the Subordinated Beneficial Interest will be suspended, and excess
spread will be used to redeem the Beneficial Interests. Key early
amortization events include a servicer replacement event occurring and
asset performance triggers being reached.
In preparation for servicer replacement, liquidity was provided
in the form of a cash reserve at closing. If a servicer replacement
event occurs, the asset trustee can dismiss the servicer and have
the back-up servicer take over as servicer. A back-up
servicer has been appointed.
Commingling Risk is covered by the Seller's 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 approximately 23%, 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 industry.
The principal methodology used in this rating was "Moody's Approach
to Rating Consumer Finance Loan ABS in Japan" published on December
6, 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 Medium, the same score assigned
to the Japanese consumer loan ABS sector. Moody's has assigned
ratings to the securitization of consumer loan receivables originated
by the seller over the past two years. This transaction's structure
is a common one, and the transaction's complexity is similar to
that of a typical consumer 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 24% or 25%, the model output for the
Class A1, Class A2, Class B, and Class C would be A2/A2,
A3/A3, Baa2/Baa3, and Ba1/Ba2, 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, 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.
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.
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
Atsushi Karikomi
Vice President - Senior 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.
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 rates Beneficial Interests of Sunshine Trust, consumer loan ABS
