JPY7.5 billion in Debt Securities affected
Tokyo, January 28, 2015 — Moodys SF Japan KK has assigned provisional ratings to
the UtoPure alpha Series1502 ABS, backed by credit card receivables.
The ratings address the expected loss posed to investors by the final
maturity date. The structure allows for timely payments of interest
(dividend) and ultimate payment of principal by the final maturity date.
Moodys issues provisional ratings in advance of the final sale of securities.
These ratings, however, represent Moodys preliminary credit
opinions only. Upon a conclusive review of the transaction and
associated documentation, Moodys will endeavor to assign definitive
ratings to the securities. Definitive ratings may differ from provisional
ratings.
The complete rating action is as follows:
Transaction Name: UtoPure alpha Series1502
Class, Scheduled Dividend/Interest Rate, Rating
alpha Series1502 Beneficial Interests, Fixed, (P)Aaa (sf)
alpha Series1502 Trust ABL, Fixed, (P)Aaa (sf)
Total Issue Amount: JPY7.5 billion
Closing Date: February 25, 2015
Revolving Period: From February 2015 to January 2016
Final Maturity Date: January 31, 2022
Underlying Asset: Credit card receivables (cash advance receivables
and card purchase receivables)
Total Amount of Receivables (Principal Amount): JPY27,016,102,017
Arranger: Mizuho Securities Co., Ltd.
RATINGS RATIONALE
The seller, being both originator and initial servicer, entrusts
a pool of eligible credit card receivables and cash to the asset trustee,
who then issues the alpha Series1502 Beneficial Interests (Series
Beneficial Interests), the Subordinated Beneficial Interests,
the Sellers Beneficial Interests, the Reserve Beneficial Interests
and the Reserve Trust Subordinated Beneficial Interests.
Entrustment of the receivables is perfected against third parties under
the Perfection Law. Perfection against obligors is not made unless
certain events occur.
The asset trustee receives a limited recourse loan (alpha Series1502 Trust
ABL, hereafter Series Trust ABL) from the investors.
The funds are used to redeem a part of the Series Beneficial Interests.
The rest of Series Beneficial Interests is transferred to the investors.
The transfer is perfected against the relevant obligors and third parties
under Article 94 of Japans Trust Law.
The Series Beneficial Interests and the Series Trust ABL are structured
pari-passu in the principal and dividend/interest waterfall under
the trust agreement.
The seller holds the Subordinated Beneficial Interests, the Sellers
Beneficial Interests, the Reserve Beneficial Interests and the Reserve
Trust Subordinated Beneficial Interests.
Credit enhancement is provided by the senior/subordinated structure and
available excess spread. Subordination comprises approximately
15.5% of the initial principal balance of the Series Beneficial
Interests, the Series Trust ABL and the Subordinated Beneficial
Interests at the closing date.
The Series Beneficial Interests and the Series Trust ABL are redeemed
in a monthly, scheduled amortization after a revolving period.
If the Subordinated Beneficial Interests amount exceeds the required amount
and certain conditions are met, then the excessive
portion can be transferred to the sellers portion.
Defaulted receivables in the underlying pool are used as payment in kind
for dividends on the Subordinated Beneficial Interests, while cash
in an amount equivalent to the principal balance of the defaulted receivables
is transferred from the interest collection account to the principal collection
account.
Additional enhancement is built up in accordance with the deterioration
in the performance of the pool through a dynamic reserve mechanism.
If any early amortization events occur, the dividend waterfall to
the Subordinated Beneficial Interests in the series is suspended,
and the excess spread is used to redeem the Series Beneficial Interests
and the Series Trust ABL. Key early amortization events include
the default rate exceeding its trigger level.
If any servicer replacement events occur, the asset trustee can
dismiss the servicer and have a back-up servicer take over the
servicing operations. A back-up servicer is appointed at
closing.
In preparation for servicer replacement, liquidity is provided in
the form of a cash reserve at closing. This reserve covers the
dividend payments on the Series Beneficial Interests, the interest
payments on the Series Trust ABL, trust fees, and fees relating
to start back-up servicer operations, etc.
Commingling risk is covered by the Sellers Beneficial Interests and advance
payment of collections.
The ratings are based mainly on the credit quality of the receivables,
the transaction structure, and the servicers experience.
Moodys estimated the annualized expected default rate (charge-off
rate) of the underlying assets at approximately 4.35%,
after taking into consideration receivable attributes, historical
data on the sellers entire pool, performance data on existing
securitization pools, and industry trends.
Moodys also believes that the base scenario of the monthly principal
payment rate is at approximately 5.3% and the annual yield
at approximately 15.2%. (These parameters are based
on Moodys definition for analytical purposes, and thus may
not be comparable to other data).
Stress Scenarios:
To determine the rating, Moodys also conducted a cash flow
analysis by adding stress consistent with the assigned rating on these
parameters. Moodys Aaa LGSD and the Aaa CE for the transaction
are 15.5% and 10.6% respectively. In
this transaction, the available credit enhancement is no less than
the Aaa LGSD at the closing. Aaa LGSD refers the level of credit
enhancement in the maximum stress scenario without considering the originators
rating.
Moodys 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 sellers or the asset trustees
bankruptcy is sufficiently minimized to achieve the rating assigned.
Moodys considers the seller sufficiently capable of servicing the pool,
having taken into account the sellers business experience and the servicing
operations.
The principal methodology used in this rating was Moodys Approach to
Rating Credit Card Receivables-Backed Securities (Japanese) published
in October 2014. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Factors that would lead to a downgrade of the rating:
The primary factor that could lead to a downgrade of the rating is worse
performance of the underlying assets than Moodys expected.
Loss and Cash Flow Analysis:
In rating this transaction, Moodys uses a cash flow model
to determine the collateral losses in a maximum stress scenario.
As a second step, Moodys haircuts such collateral losses based
on the sponsors credit quality. Finally, Moodys
compares note available credit enhancement with the collateral losses,
taking into account loss allocation and other structural features,
to derive the expected loss for each rated instrument.
If the transactions annualized expected charge-off rate
and expected long-run charge-off rate used in determining
the initial rating (4.35%/8.0%) were changed
to 6.5%/10.0% or 8.7%/12.0%,
the model output in these two scenarios would be Aaa and Aa1 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.
REGULATORY DISCLOSURES
For further specification of Moodys key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Moodys did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments in this transaction.
Moodys describes its loss and cash flow analysis in the section
Ratings Rationale of this press release.
Moodys describes the stress scenarios it has considered for this
rating action in the section Ratings Rationale of this press
release.
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 Moodys
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 providers 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.
Moodys SF Japan KK is a credit rating agency registered
with the Japan Financial Services Agency and its registration number is
FSA Commissioner (Ratings) No. 3. The Financial Services
Agency has not imposed any supervisory measures on Moodys SF Japan KK
in the past year.
Moodys SF Japan KK 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 Moodys SF Japan KK are Registered
Credit Ratings to the FSA, but are not NRSRO Credit Ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moodys 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.
Atsushi Karikomi
VP – Senior Credit Officer
Structured Finance Group
Moodys SF Japan KK
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:
Moodys SF Japan KK
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4220
SUBSCRIBERS: (03) 5408-4210
Moodys assigns provisional ratings to UtoPure alpha Series1502, credit card receivables ABS
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