JPY 6.0 billion in Senior Beneficial Interests and Trust ABL affected
Tokyo, September 12, 2011 -- Moody's Japan K.K. has assigned definitive ratings to the
Loans on Deed ABS Symphony transaction.
The transaction is backed by a loan on deed receivables.
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 interests, and ultimate
payment of the principal by the final maturity date / the final payment
date.
The complete rating actions are as follows:
Deal Name: Loans on Deed ABS Symphony
Class, Amount, Scheduled Dividend / Interest Rate, Rating
Senior Beneficial Interests, JPY 5.5 billion, Fixed,
Aaa (sf)
Trust ABL, JPY 0.5 billion, Fixed, Aaa (sf)
Total Issue Amount: JPY 6.0 billion
Payment Frequency: Monthly
Entrustment Date: August 31, 2011
Transfer Date of Beneficial Interests / Loan Funding Date: September
12, 2011
Final Maturity Date / Final Payment Date: August 31, 2021
Underlying Asset: Loan on Deed receivables
Total Amount of Receivables (Principal Amount): JPY 9,936,599,269
Arranger: Mizuho Securities Co., Ltd.
RATING RATIONALE
The underlying receivables are unsecured, loans on deed receivables
and consist of a) loans refinancing the existing credit card debt of obligors
and b) loans which are mostly with specific purpose.
The Seller, being both originator and initial servicer, entrusted
a pool of its loan on deed receivables to the Asset Trustee, and
received the Senior Beneficial Interests, a Subordinated Beneficial
Interest, and a Reserve 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 the limited recourse loan ("Trust ABL")
from Investors. The proceeds was used to redeem a portion of the
Senior Beneficial Interests in full.
The Senior Beneficial Interests(excluding the portion redeemed by the
Trust ABL) was transferred to investors. The transfer was perfected
against the relevant obligors and third parties under Article 94 of Japan's
Trust Law.
The Seller holds the Subordinated Beneficial Interest and the Reserve
Beneficial Interest.
Credit enhancement is provided by the senior/subordinated structure and
available excess spread. Subordination (excluding that corresponding
to a cash reserve) comprises approximately 39.6% of the
initial principal balance of the receivables.
The Senior Beneficial Interests and the Trust ABL will be redeemed/repaid
on a scheduled monthly amortization basis. The Subordinated Beneficial
Interest will not be redeemed until the Senior Beneficial Interests and
the Trust ABL are fully redeemed.
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).
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 Senior Beneficial Interests and to repay
the Trust ABL. Key early amortization events include a servicer
replacement event occurring or an asset performance trigger being reached.
In preparation for servicer replacement, liquidity was provided
in the form of a cash reserve at closing. This reserve will cover
the dividend payments on the Senior Beneficial Interests, interest
payments on the Trust 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 will be 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 approximately 11.3%, taking into consideration
receivable attributes, historical data on the seller's entire
pool, performance data on the seller's entire credit card
receivables pool as well as 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 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 a third-party
due diligence report 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.
Compared to the typical credit card cash advance ABS, the transaction
features a short data history. However, we may supplement
our analysis by referring to the performance of the seller's and
other originators' entire credit card receivables as well as by
monitoring the data on existing securitization transactions backed by
credit card receivables. The transaction structure -- without
a revolving period and sequential payment structure -- may contribute
to a rating stabilization.
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 13.5% or 15.5%, the
model output for the Senior Beneficial Interests and the Trust ABL would
be 1 notch down(Aa1) for 13.5% and 2 notches down(Aa2) for
15.5%, 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 rating implementation guidance, "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. 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
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 Loans on Deed ABS Symphony; backed by Loan on Deed receivables
