JPY 10.0 billion in Investor Beneficial Interests and ABL affected
Tokyo, March 30, 2011 -- Moody's Japan K.K. has assigned definitive ratings to Dolce
Loan Card Receivables Trust Beneficial Interest and ABL.
The ratings address the expected loss posed to investors by the final
maturity date / the final payment date. The structure allows for
timely payments of dividends (in scheduled amounts, on scheduled
payment dates), timely payments of interest and ultimate payment
of principal by the final maturity date / the final payment date.
The complete rating action is as follows:
Deal Name: Dolce Loan Card Receivables Trust Beneficial Interest
and ABL
Class, Issue Amount, Scheduled Dividend/Interest Rate,
Rating
Investor Beneficial Interests, JPY 8.5 billion, Fixed,
Aaa (sf)
ABL, JPY 1.5 billion, Fixed, Aaa (sf)
Total Issue Amount: JPY 10.0 billion
Payment Frequency: Monthly
Entrustment Date: March 22, 2011
Transfer Date of Investor Beneficial Interests/Scheduled ABL Funding Date:
March 30, 2011
Revolving Period: From March 2011 to March 2012
Final Maturity Date / Final Payment Date: March 31, 2017
Underlying Asset: Loan card receivables
Total Amount of Receivables (Principal Amount): JPY 34,681,806,199
Arranger: Daiwa Securities Capital Markets Co. Ltd.
RATING RATIONALE
The seller, being both originator and initial servicer, entrusted
a pool of eligible loan card receivables to the asset trustee, which
then issued Investor Beneficial Interests, an ABL Beneficial Interest,
a Subordinated Beneficial Interest and a Seller's 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 asset trustee received a limited recourse loan ("ABL") from the ABL
lender. The funds were used to redeem the ABL Beneficial Interest
in full.
The Seller will hold the Subordinated Beneficial Interest and the Seller's
Beneficial Interest, and has transferred the Investor 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 comprises approximately
35% of the total initial principal balance of the Investor Beneficial
Interests, ABL and the Subordinated Beneficial Interest.
The Investor Beneficial Interests and the ABL will be redeemed/repaid
in a sequential, monthly, scheduled amortization after a one-year
revolving period.
Defaulted receivables in the underlying pool will be used as payment in
kind for dividends on the Subordinated Beneficial Interest, while
cash in an amount equivalent to the principal balance of the defaulted
receivables will be transferred from the interest collection account to
the principal collection account (defaulted trapping mechanism).
Additional enhancement will be built up in accordance with deterioration
in the performance of the pool through a dynamic reserve mechanism.
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/repay the Investor Beneficial Interests
and the ABL. Key early amortization events include the default
rate exceeding its trigger level.
In preparation for servicer replacement, liquidity was provided
in the form of a cash reserve at closing. This reserve will cover
the dividend and interest payments on the Investor Beneficial Interests
and the ABL, trust fees, and fees relating to start back-up
servicer operations, etc.
If any servicer replacement events occur, the asset trustee can
dismiss the servicer. A back-up servicer was appointed at
closing.
Commingling risk is covered by the Seller's Beneficial Interest and advance
payment of collections.
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 13%, taking into consideration receivable
attributes, historical data on the seller's entire pool,
performance data on past securitization pools, and industry trends.
Moody's also believes that the base scenario of the monthly principal
payment rate is at approximately 5% and the annual yield at approximately
17%. (These parameters are based on Moody's definition
for analytical purposes, and thus may not be comparable to other
data).
To determine the rating, Moody's also conducted a cash flow
analysis by adding stress consistent with the assigned rating on these
parameters, such as the expected default rate.
In Moody's view, the impact of the March 11 earthquake on
the underlying pool has been limited, given the limited number of
loans from the stricken area in the pool, as well as the revolving
period. Even if the default rate rises, robust deal structures
such as the dynamic reserve will contribute to rating stability.
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 experience in the credit card industry.
The principal methodology used in this rating was "Moody's
Approach To Rating Credit Card Receivables-Backed Securities,"
published on December 6, 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 Credit Card Cash Advance ABS sector. Moody's has
assigned ratings to securitizations of loan card receivables, backing
this transaction, for about ten years. The structure of this
transaction is a common one, and the level of complexity is similar
to that of a typical Credit Card Cash Advance 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 18% or 20%, the model output for the
Investor Beneficial Interests and the ABL in these two scenarios would
be 0 notches down (Aaa) for a 18% default rate, and 1 notch
down (Aa1) for a 20% 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 methodologies, "Updated Report on V Scores and Parameter
Sensitivities for Structured Finance Securities," published
on September 30, 2010 and " V Scores and Parameter Sensitivities
in the Global Consumer Loan ABS Sector," published on September
30, 2010, are available on www.moodys.co.jp.
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.
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 Dolce Loan Card Receivables Trust Beneficial Interest and ABL
