Moody's assigns provisional rating to SBM handset ABS deal
Tokyo, December 11, 2012 -- Moody's SF Japan K.K. has assigned a provisional rating of Aaa (sf) to the Senior Trust Certificates of JPY 15.0 billion, backed by handset installment sales receivables, originated by SOFTBANK MOBILE Corp.
Moody's SF Japan K.K. is a registered credit rating agency under the Financial Instrument and Exchange Act but not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, the credit ratings assigned by Moody's SF Japan K.K. are Registered Credit Ratings to the FSA but are not NRSRO Credit Ratings.
The ratings address the expected loss posed to investors by the final maturity date. The structure allows for timely payments of dividends (in scheduled amounts, on scheduled payment dates), and the ultimate payment of the principal by the final maturity date.
Moody's issues provisional ratings in advance of the final sale of securities. These ratings, however, represent Moody's preliminary credit opinions only. Upon a conclusive review of the transaction and associated documentation, Moody's will endeavor to assign definitive ratings to the securities. Definitive ratings may differ from provisional ratings. The provisional rating is based on information received as of December 10, 2012.
The complete rating action is as follows:
Deal Name: SBM Handset Installment Sales Receivables Securitization 2012-12
Class: Senior Beneficial Interests
Rating: (P)Aaa (sf)
Scheduled Issue Amount: JPY 15.0 billion
Scheduled Dividend Rate: Floating
Payment Frequency: Monthly
Scheduled Entrustment Date: December 21, 2012
Scheduled Transfer Date of Senior Trust Certificates: December 27, 2012
Scheduled First Payment Date for Principal & Dividends for Senior Trust Certificates: April 4, 2013
Final Maturity Date: July 4, 2017
Underlying Asset: Handset Installment Sales Receivables
Total Amount of Underlying Asset: JPY19,400,048,800 (as of end of October 2012)
Seller (Originator/Initial Servicer): SOFTBANK MOBILE Corp. ("SBM")
Trustee: Mizuho Trust & Banking Co., Ltd. ("Mizuho Trust")
Back-up Servicer: Japan Collection Service Co., Ltd.
Cap Provider: Tokio Marine Financial Solutions Ltd. (Aa3)
Arranger: Mitsubishi UFJ Trust and Banking Corporation
Arranger/Program Manager: Mizuho Corporate Bank, Ltd.
The Seller will entrust a pool of installment sales receivables and cash to the Asset Trustee, and will, in turn, receive the Senior Trust Certificates, the Class A through C Seller Trust Certificates, and the Subordinated Trust Certificates.
Entrustment of the receivables will be 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 Seller will hold the Class A through C Seller Trust Certificates and the Subordinated Trust Certificates, but will transfer the Senior Trust Certificates to Investors.
The transfer of the Senior Trust Certificates will be perfected against the relevant obligors and third parties by obtaining the Trustee's approval in writing with a certified date under Article 94 of Japan's Trust Law.
The Asset Trustee will enter into an interest-rate cap agreement with a cap provider to hedge its interest-rate risk.
Credit enhancement is provided by the senior/subordinated structure. Subordination comprises approximately 18.4% of the initial principal balance of the Senior Trust Certificates and the Subordinated Trust Certificates.
The Senior Trust Certificates and the Subordinated Trust Certificates will be redeemed in a monthly amortization. The Subordinated Trust Certificates will be redeemed to the extent that certain conditions are met.
Defaulted receivables in the underlying pool will be used as payment in kind for dividends on the Subordinated Trust Certificates. The purpose is payment of redemptions to the Subordinated Trust Certificates.
At the same time, cash -- equivalent to the principal balance of the defaulted receivables -- will be transferred from the interest collection account to the principal collection account, and the outstanding amount of the Subordinated Trust Certificates will be increased by the same amount (default trapping mechanism).
If any early amortization events occur, the dividend and principal waterfall to the Subordinated Trust Certificates will be suspended, and collections -- after the payment of cost and dividends -- will be used to redeem the Senior Trust Certificates.
Key early amortization events include the occurrence of a tax event or asset performance triggers being reached.
In preparation for Servicer replacement, liquidity will be provided in the form of a cash reserve at closing. If any Servicer replacement preparation events occur, additional enhancement will be provided. And 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 advance payment of collections from the underlying assets and Subordinated Trust Certificates.
The rating is based mainly on the strength of the transaction structure, the credit of the receivables, and the Servicer's experience.
The assets are handset installment sales receivables originated by SBM. They are diversified because the obligors are consumers and the average outstanding amount (per obligor) is low at approximately JPY50,000.
Moody's estimated the annualized expected default rate of the underlying assets at approximately 1.6%, taking into consideration the receivables' attributes, historical data on the seller's entire pool, performance data on existing securitization pools, and trends in telecommunications charges. (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 by adding stress consistent with the assigned rating on parameters, such as the expected default rate.
Moody's assumes that, given the structure of the transaction and 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 considers the Seller is sufficiently capable of servicing the underlying pool, as SBM has substantial experience as an Initial Servicer in the mobile telecommunications carrier industry.
The principal methodology used in these ratings was "Moody's Approach to Rating Japanese Installment Sales Loan Receivables ABS," published on September 30, 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 originator has been issuing handset installment sales receivables ABS since June 2007. Moody's conducted its analysis using data for past transactions, and its entire portfolio. Moody's also used performance data for the collection of telecommunications charges. In this area, there is more data available -- on a historical basis -- than that for handset installment sales receivables.
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 4.7% or 6.2%, the model output for the rated class in these two scenarios would be zero notches down (Aaa) for a 4.7% default rate, and one notch down (Aa1) for a 6.2% 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 rating implementation guidance, "Updated Report on V Scores and Parameter Sensitivities for Structured Finance Securities," published on September 30, 2010, is available on www.moodys.co.jp.
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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 Arrangers and Originator); 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 rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
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 will not disclose information pertinent to this transaction to third parties. However, the Arrangers and the Trustee shared the information pertinent to this transaction.
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Yusuke Minaki Analyst Structured Finance Group Moody's SF Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: (03) 5408-4220 SUBSCRIBERS: (03) 5408-4210 Yusuke Seki Associate Managing Director Structured Finance Group JOURNALISTS: (03) 5408-4220 SUBSCRIBERS: (03) 5408-4210 Releasing Office: Moody's SF Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: (03) 5408-4220 SUBSCRIBERS: (03) 5408-4210 Copyright 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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