JPY1.665 billion in ABL affected
Tokyo, November 13, 2012 -- Moody's SF Japan K.K. has assigned a definitive Aaa (sf) rating to Auto Loan ABS Program 1211 Series, backed by auto loan receivables.
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 rating addresses the expected loss posed to investors by the final payment date. The structure allows for timely payments of interest and ultimate payment of principal by the final payment date.
The complete rating action is as follows:
Deal Name: Auto Loan ABS Program 1211 Series
Class: ABL Rating: Aaa (sf) ABL Amount: JPY1.665 billion Interest Rate: Fixed Payment Frequency: Monthly Entrustment Date: November 13, 2012
ABL Funding Date: November 13, 2012
Final Payment Date: January 17, 2019
Underlying Asset: Auto loan receivables
Total Amount of Receivables: JPY1,998,750,076 (JPY1,944,607,697 in principal)
Loan Fund Trustee/Money Fund Trustee: Mizuho Trust & Banking Co., Ltd. ("Mizuho Trust", A1/P-1)
Arranger: Mizuho Trust RATINGS RATIONALE The Loan Fund Trustee entered the affiliated auto loan program agreement with the affiliated financial institution, acting as originator and initial servicer.
The Loan Fund Trustee extends the affiliated loan to Obligors based on the affiliated auto loan agreement.
The originator entrusted cash to the Money Fund Trustee, to enhance the credit and the liquidity of the Auto Loan fund, and received the Money Fund Beneficial Interest. The Money Fund Trustee entrusted the cash, in an amount equal to the Money Fund Beneficial Interest, to the Loan Fund Trustee, and received the Class 2 Beneficial Interest.
The originator entrusted cash to the Loan Fund Trustee and received the Class 1 Beneficial Interest. The Loan Fund Trustee received a limited recourse loan (the ABL) from the ABL Investor and redeemed the Class 1 Beneficial Interest in full.
Credit enhancement is provided by the senior/subordinated structure and available excess spread. Subordination (excluding liquidity reserve) comprises approximately 18.3% of the total outstanding amount of the ABL and the Class 2 Beneficial Interest.
The ABL will be redeemed on a monthly pass-through basis. The Class 2 Beneficial Interest will be partly redeemed to the extent that the required enhancement is maintained.
If any early amortization events occur, the dividend waterfall to the Class 2 Beneficial Interest will be suspended, and excess spread will be used to redeem the ABL.
In preparation for servicer replacement, liquidity was provided in the form of a cash reserve at closing. This reserve will cover interest payments on the ABL, fees relating to initial and ongoing back-up servicer operations. If any servicer replacement events occur, the Trustee can dismiss the Servicer. A back-up servicer was appointed at closing.
The commingling risk is covered by the Class 2 Beneficial Interest.
The rating is based mainly on the strength of the 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 2.1%, taking into consideration receivable attributes, historical data on the originator's entire pool, performance data on 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 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 as well as other factors, the risk of interruption to the cash flow from the assets in the event of the originator's or the Trustee's bankruptcy is sufficiently minimized to achieve the rating assigned.
Moody's examined the originator's operations and considers it sufficiently capable of servicing the underlying pool as initial servicer, given its substantial experience in the auto loan industry.
The principal methodology used in rating the rating was "Moody's approach to Rating Japanese Auto Loan 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, and is the same score assigned to the Japanese Auto Loan ABS sector.
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 on the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, modelling, 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 3.2 % or 4.2 %, the model output for ABL in these two scenarios would be 1 notch down (Aa1) for a 3.2% default rate, and 2 notches down (Aa2) for a 4.2% 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 and "V Scores and Parameter Sensitivities in the Non-U.S. Vehicle ABS Sector" published on September 30, 2010, are available on www.moodys.co.jp.
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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 and the Originator), public information; and confidential and proprietary Moody's information.
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A profile of the originator follows:
Business sector: Financial industry
Size of business: More than JPY 100 billion in total assets.
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 had 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 information pertinent to this transaction to their investors who would invest in the 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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