JPY20 billion of asset-backed securities rated
Hong Kong, April 27, 2011 -- Moody's Investors Service has assigned a definitive rating of A1 (sf)
to the Secured Floating Rate Notes issued by KAL Japan ABS 6 Cayman Limited.
The transaction is brought to the market by Daiwa Securities Capital Markets
Co. Ltd., Seoul branch and The Korea Development Bank.
The complete rating action is as follows:
Issuer: KAL JAPAN ABS 6 CAYMAN LIMITED
.... JPY20 billion Secured Floating Rate Notes
due 2014, Assigned A1 (sf)
RATINGS RATIONALE
The rating is based on an unconditional and irrevocable credit facility
and an interest rate swap provided by the Korea Development Bank (KDB;
A1/Prime-1/D) for the timely payment of scheduled principal and
interest on the notes. As such, the rating on the notes is
highly linked to the rating of KDB.
In assigning the definitive rating, Moody's considered a number
of factors, among them:
1. the unconditional and irrevocable credit facility and the interest
rate swap provided by the Korea Development Bank; and
2. the legal and structural protections in the transaction.
KAL Japan ABS 6 Cayman Limited -- a newly established, bankruptcy-remote,
special purpose company incorporated in the Cayman Islands -- issues
secured floating rate notes and uses the proceeds to acquire a Yen-denominated
variable rate bond issued by the bond issuer, a limited liability
special securitization company incorporated in Korea.
The bond issuer uses the proceeds to acquire an investor beneficiary certificate
from the originator, Korean Air Lines Co., Ltd.
(KAL). KAL entrusted to the Japanese trust a portfolio of Yen-denominated
air cargo receivables on the entrustment date and a pre-funded
reserve on the closing date in exchange for an investor beneficiary certificate
and a seller beneficiary certificate issued by the Japanese trust.
The notes has a pre-defined monthly principal amortization schedule
and bear an interest rate equals to one-month JPY-LIBOR
plus a spread.
METHODOLOGY
Moody's analysis of the transaction is based primarily on the credit
facility and the interest rate swap that KDB provide. KDB provides
an unconditional and irrevocable Yen-denominated credit facility
to the note issuer in exchange for a credit facility provider's
fee and also enters into a fixed and floating interest rate swap to exchange
a fixed Yen-denominated payment stream into a JPY-LIBOR
Yen-denominated payment stream.
The initial commitment amount is designed to cover all the payments of
principal on the notes, the fixed payments payable by the note issuer
under the interest rate swap as well as an amount determined to cover
the credit facility fees and the senior fees. The commitment amount
also has a cushion to cover any extraordinary fees and expenses or any
increase in fees denominated in currencies other than Yen due to changes
in the exchange rate.
The maximum amount that can be drawn on the credit facility at closing
will be capped at the initial commitment amount of JPY20.76 billion.
The commitment amount will be reduced by an amount equal to the actual
note principal payments, the swap payment, senior fees and
expenses, and the credit facility fees, but not the amount
set to cover extraordinary senior fees and expenses. This structure
provides a buffer that will cover the payment of any extraordinary items.
The notes benefits from the committed credit facility until maturity,
for a term of three years. The obligations of KDB as the credit
facility provider cannot be cancelled, waived, or varied prior
to the discharge in full of the outstanding amount of the notes.
Also, any failure to pay the credit facility provider's fee
will not prejudice the rights of the note issuer or relieve the credit
facility provider of its obligations under the credit facility arrangement.
Furthermore, KDB's obligations to the note issuer under the
credit facility agreement will not be discharged, impaired,
or otherwise affected by:
• the making or absence of any demand on the note issuer for payment;
• the winding-up of the note issuer; or
• any of the note issuer's obligations under the notes or the
note trust deed becoming illegal, invalid, unenforceable,
or ineffective.
The commitment amount of the credit facility is fixed and the rated notes
bear one-month JPY-LIBOR plus a spread. The interest
rate swap with KDB mitigates any interest rate mismatch between the fixed
commitment amount in the credit facility and the floating amount payment
obligation in the notes.
The rating on the notes will be linked to KDB's, as the transaction's
credit quality depends on KDB's ability to fulfill its obligations
under the credit facility deed and the interest rate swap. Consequently,
any change to KDB's rating will result in a corresponding change
to the rating on the notes.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments in this transaction.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
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.
Please see ratings tab on the issuer/entity page on Moodys.com
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 Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Hong Kong
Jerome Cheng
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Tokyo
Koji Kumamaru
MD - Structured Finance
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's rates KAL air cargo receivables deal A1 (sf)
