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Rating Action:

Moody's takes rating actions on Japanese structured finance deals following downgrades of JHF and RLGs

 The document has been translated in other languages

04 Dec 2014

Tokyo, December 04, 2014 -- Moody's Japan K.K. has downgraded 38 RMBS, one ABS, and nine repack ratings following the ratings downgrade of the Japan Housing Finance Agency ("JHF"), Japanese regional and local governments ("RLGs"), and a counterparty.

Moody's had downgraded the ratings of JHF and RLGs to A1 from Aa3 on December 3, 2014.

http://www.moodys.com/viewresearchdoc.aspx?docid=PR_313714

http://www.moodys.com/viewresearchdoc.aspx?docid=PR_313707

For a list of the affected structured finance ratings, refer to:

http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF388758

RATINGS RATIONALE

Deals 1 to 31

The downgrade of deals 1 to 31 follows the downgrade of JHF to A1 from Aa3.

With these 31 RMBS transactions, JHF is obliged to guarantee the principal of and scheduled dividend payments on the Mortgage Beneficial Interests, and insure the underlying residential mortgage loan receivables.

The ratings on the Mortgage Beneficial Interests are therefore linked to JHF's rating in principle.

If the rating of JHF changes, the rating of these Mortgage Beneficial Interests would change accordingly, assuming other conditions are unchanged.

The Aaa-rated Mortgage Beneficial Interests in deals 27 to 29, which are originated by SBI Mortgage Co., Ltd., are not impacted by the rating change of JHF.

Deals 32 to 34

The downgrade of deals 32 to 34 follows the downgrade of a counterparty, to which the Beneficial Interests of these deals are linked.

If the rating of this counterparty changes, the rating of these Beneficial Interests would change accordingly.

The Aaa-rated Beneficial Interests in these three deals are not impacted by the rating change of the counterparty.

Deal 35

For deal 35, the downgrade of the Senior Beneficial Interests follows the change in the credit quality of Ibaraki Prefecture.

The rating is affected by the credit quality of the prefecture, as the prefecture owns and manages the originator. If the prefecture were to default, this could have a negative impact on both the originator's operations and likely recovery.

Deals 36 to 37

For deals 36 and 37, the downgrade follows the declining credit quality of the collateral assets, which are loans to eight RLGs.

If the credit quality of the RLGs changes, the ratings of deals 36 and 37 would change accordingly.

Deal 38

For deal 38, the downgrade follows the downgrade of the asset backed loan (ABL) rating to A1 (sf).

This transaction's underlying assets are repackaged loans and beneficial interests backed by the ABL, the security for which is loans to Japanese RLGs.

If the credit quality of the ABL declines, the rating of deal 38 would change accordingly.

Methodologies applicable for specific tranches are listed in the list of ratings downgraded above.

On October 22, 2014, Moody's issued a "Request for Comment" asking for market feedback on proposed changes to the methodology it uses to rate RMBS in Japan. Please see "Request for Comment: Moody's Proposed Approach to Rating Japan RMBS", which is available at www.moodys.com, for more information about the implications of the proposed changes to the methodology on Moody's ratings.

Factors that would lead to an upgrade or downgrade of the rating:

For deals 1 to 31, the primary factor that could lead to a rating downgrade or upgrade is a deterioration or improvement in the credit quality of JHF. The rating of the Mortgage Beneficial Interests is linked to that of the JHF in principle. If the rating of the JHF changes, the rating of the Mortgage Beneficial Interests would change accordingly.

For deals 32 to 34, the factor that could lead to a rating downgrade or upgrade is a deterioration or improvement in the credit quality of the counterparty to which the Beneficial Interests' ratings are linked.

For deal 35, the rating of the Senior Beneficial Interests is exposed to the amount of cash flow to be generated from the waste disposal business. The cash flow is, in turn, affected by the future volumes of waste disposal, unit prices, and ongoing business costs. A lower-than-expected cash flow will therefore lead to downward rating pressure. In addition, the rating is affected by the credit quality of Ibaraki Prefecture. An improvement or deterioration in its credit quality may accordingly lead to upward or downward rating pressure.

For deals 36 to 37, the factor that could lead to a rating downgrade or upgrade is a deterioration or improvement in the credit quality of the eight RLGs.

For deal 38, the factor that could lead to a rating downgrade or upgrade is a deterioration or improvement in the credit of the ABL to which the Beneficial Interest's rating is linked.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of these transactions in the past six months.

Moody's did not use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Shinji Yoshizawa
Asst Vice President - Analyst
Structured Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 813-5408-4110
SUBSCRIBERS: 813-5408-4100

Marie Lam
Associate Managing Director
Structured Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Hisashi Hashimoto
Associate Analyst
Structured Finance Group
JOURNALISTS: 813-5408-4110
SUBSCRIBERS: 813-5408-4100

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 813-5408-4110
SUBSCRIBERS: 813-5408-4100

Moody's takes rating actions on Japanese structured finance deals following downgrades of JHF and RLGs
No Related Data.
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