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Global Credit Research - 21 May 2010
JPY 11.4 Billion of Notes Affected
Tokyo, May 21, 2010 -- Moody's Investors Service has placed under review for possible downgrade
the ratings assigned to KK Atami Beach Line Funding 2 and Atami Beach
Line Mezzanine Funding Limited.
Both deals are backed by toll revenues from Atami Beach Line Motor Road
(Atami Beach Line). Notes for KK Atami Beach Line Funding 2 (the
Senior Notes) were issued in July 2007, for Atami Beach Line Mezzanine
Funding (the Mezzanine Notes), in May 2002.
The complete rating actions follow:
Deal Name: KK Atami Beach Line Funding 2 (Senior Note Issuer)
Class A-2 Note, JPY 5.5 billion, Aaa placed
under review for possible downgrade; previously on July 24,
2007 definitive rating assigned Aaa
Class B Note, JPY 1.2 billion, Aa2 placed under review
for possible downgrade; previously on July 24, 2007 definitive
rating assigned Aa2
Class C Note, JPY 1.2 billion, A3 placed under review
for possible downgrade; previously on July 24, 2007 definitive
rating assigned A3
Deal Name: Atami Beach Line Mezzanine Funding Limited (Mezzanine
Mezzanine Note, JPY 3.5 billion, Baa2 placed under
review for possible downgrade; previously on May 31, 2002 definitive
rating assigned Baa2
Traffic volume on the Atami Beach Line has been consistently below Moody's
This rating action reflects Moody's concerns that traffic volume will
remain weak and that the consequently weak Annual Net Cash Flow from underlying
assets are unlikely to recover any time soon.
The Class A-1 Note, originally for JPY 0.4 billion
and rated Aaa, is not a subject of this rating action, as
it has been redeemed as scheduled. Moody's believes that
the principal of the note is highly likely to be redeemed in full by maturity
in May 2012.
The Senior Notes and Mezzanine Notes are backed by a Senior Loan and a
Mezzanine Loan, both of which were taken out by Atami Beach Line
Limited, the Borrower SPC. Mitsui Kanko Development Co.,
Ltd. ("MKD," which is now GRANVISTA Hotels & Resorts
Co., Ltd.) transferred ownership of the Atami Beach
Line to the Borrower SPC. Atami Beach Line was then leased back
to MKD, which operates the toll road business. GRANVISTA
pays the Borrower SPC the entire toll revenue in advance. The Borrower
SPC then pays GRANVISTA its operating fee. The remainder --
the toll revenue minus the operating fee -- is the rent revenue.
The loan principal and interest on the loans are paid out of the rent
revenue, minus taxes and fees, insurance premiums, repair
costs, and capital expenditures (Annual Net Cash Flow).
Traffic volume on the Atami Beach Line was 3.34 million through
June 2006 to May 2007, but Moody's expects it declins around
10% (around 3 million) from June 2009 to May 2010. This
decline should be due not to a decline in everyday use, but mainly
to a decline in travel, stemming from economic and political events:
the introduction of discounts on other toll expressways around the country;
changes in consumer habits and preferred travel destinations; and
an increase in the use of public transportation and a concomitant decline
in the use of automobiles.
The Senior Notes (other than Class A-1 Note) will likely be paid
down with a bullet payment at the expected maturity in May 2012.
However, the Borrower SPC will have two opportunities to refinance
the Senior Loan between September 2011 and the May 2012 maturity date.
The expected maturity of Mezzanine Notes is May 2027; these notes
have been redeemed semi-annually as scheduled, as well as
the amount relationg to excess cash in the structure. If Annual
Net Cash Flow remains below Moody's expectation, the redemption
of the Mezzanine Notes will slow down and the outstanding balance at their
expected maturity will rise. And if the Senior Loan is not refinanced
before the Senior Notes' expected maturity in May 2012, both
the Senior Loan and the Mezzanine Loan may be refinanced during the tail
period between the Senior Notes' expected maturity in May 2012 and
their final maturity in May 2015.
Moody's thus believes that its Annual Net Cash Flow estimates need
to be re-considered -- hence, the review for possible
In its review, Moody's will take into account GRANVISTA's
outlook for traffic volume and toll revenue, as well as repair costs
and capital expenditures for the line. Moody's will also
examine GRANVISTA's policies and operations. In addition,
Moody's will discuss with relevant parities the practical approach
The principal methodology used in rating this transaction was "Moody's
Approach to Rating Japanese Whole Business Securitizations" published
in April 2007, which can be found at www.moodys.com
in the Research & Ratings directory, in the Rating Methodologies
Other methodologies and factors that may have been considered in the process
of rating these transactions can also be found in the Rating Methodologies
Moody's Investors Service is a publisher of rating opinions and research.
It is not involved in the offering or sale of any securities, nor
is it acting on behalf of the offering party. This release is not
a solicitation or a recommendation to buy, hold, or sell securities.
Soichiro Makimoto / Analyst
Mitsuteru Masuoka / VP-SCO
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's reviews Atami Beach Line WBS deals for downgrade
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
No Related Data.
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