Research: Rating Action: Moody’s raises the ratings of Trust Beneficial Interest (201603-1) and (201603-2)



Tokyo, September 20, 2022 — Moody’s SF Japan KK has raised the ratings of beneficial interest issued by Trust Beneficial Interest (201603-1) and Trust Beneficial Interest (201603-2) backed by residential mortgages.

The ratings concerned are as follows:

Beneficial interest of the trust (201603-1)

….JPY2.11 billion class b4 beneficial interest, upgraded to Aaa (sf); previously on Dec 17, 2021 Upgraded to Aa1 (sf)

Beneficial interest of the trust (201603-2)

….JPY2.03 billion class b4 beneficial interest, upgraded to Aa2 (sf); previously on Dec 17, 2021 Upgraded to Aa3 (sf)

Transaction Name: Beneficial Interest of Trust (201603-1)

Dividend: Fixed

Closing date: March 25, 2016

Final Maturity Date: March 31, 2050

Underlying asset: Residential mortgages

Arranger: Mizuho Securities Co., Ltd.

Subordination: Class b4 = 8.6% (End of August 2022)

Transaction Name: Beneficial Interest of Trust (201603-2)

Dividend: Fixed

Closing date: March 25, 2016

Final Maturity Date: November 30, 2051

Underlying asset: Residential mortgages

Arranger: Mizuho Securities Co., Ltd.

Subordination: Class b4 = 6.4% (End of August 2022)

RATINGS RATIONALE

The ratings upgrade reflects the increase in credit enhancement resulting from the redemption of beneficial interests in a sequential manner that begins with the senior class, followed by the junior classes.

The performance of the underlying loans for both transactions has so far shown low levels of default. Certain delinquent loans and modified loans were repurchased by the originator and no loss was recorded in the transactions.

Moody’s has assumed an expected cumulative gross loss rate of 2.4% for the beneficial interest of the trust (201603-1) and 2.7% for the beneficial interest of the trust (201603-2). Moody’s also assumed a current portfolio expected loss (EL) of 1.2% for both transactions and a MILAN credit enhancement (EC) of 5.0% for both transactions.

The expected cumulative gross loss rate is the cumulative amount of defaults before collection that are expected to occur over the life of the pool, divided by the closing pool balance.

Moody’s determined a probability loss distribution using the EL portfolio and the MILAN CE, and performed a cash flow analysis with several portfolio loss scenarios of the distribution.

The transactions are potentially exposed to asset-liability interest rate mismatches between the underlying mortgages and their liabilities. Moody’s has incorporated this risk into the cash flow analysis.

The main methodology used in these ratings was “Moody’s Approach to Rating RMBS Using the MILAN Framework (Japanese)” published in September 2022 and available at https://ratings.moodys.com/api/rmc-documents/392659. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Please note that an Invitation to Comment has been issued in which Moody’s seeks market comment on potential revisions to one or more of the methodologies used to determine these credit ratings. If the revised methodologies are implemented as proposed, it is currently not expected that the credit ratings referenced in this press release will be affected.

The request for feedback can be found on the scoring methodologies page on https://ratings.moodys.com.

Factors that would lead to an upgrade or downgrade of ratings:

Factors that could cause ratings to be upgraded or downgraded include an improvement or deterioration in the credit quality of the collateral pool, the amount of credit enhancement available for each tranche and interest rate mismatches. active-passive interest.

Moody’s has also performed the sensitivity analysis below, which indicates the number of notches by which the outcome of the operation indicated by the model would have changed if different assumptions had been made about certain key model parameters. The analysis assumes that the case has not aged.

If the expected cumulative gross loss rate and CE MILAN for the beneficial interest of the trust (201603-1) were changed from 2.4% / 5.0% to 3.2% / 6.5% and the other assumptions remained unchanged, the output indicated by the model of the class b4 beneficiary interest would change by one notch.

If the Expected Cumulative Gross Loss Rate and MILAN CE for Beneficial Interest of the Trust (201603-2) has been changed from 2.7% / 5.0% to 3.5% / 6.5% and the other assumptions remained unchanged, the output indicated by the model of the class b4 beneficiary Interest would change by 2 notches.

The results of the analysis are modeled outputs, which are one of many quantitative and qualitative factors that rating committees consider in determining actual ratings. This analysis is not intended to measure how the rating of the deal might migrate over time, but rather how the initial output indicated by the model of the deal might have differed had certain key model parameters been changed.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

The analysis includes an evaluation of collateral characteristics and performance to determine expected collateral loss or a range of collateral losses or expected cash flows for rated instruments. Second, Moody’s estimates collateral losses or expected cash flows using a quantitative tool that takes into account credit enhancement, loss distribution and other structural characteristics, to derive the loss expected for each scored instrument.

Moody’s quantitative analysis involves an evaluation of scenarios that focus on factors contributing to rating sensitivity and consider the likelihood of material collateral losses or impaired cash flows. Moody’s weights the impact on rated instruments based on its assumptions of the likelihood of events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Moody’s SF Japan KK is a registered credit rating agency under the Financial Instruments and Exchanges Act, but not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Accordingly, credit ratings assigned by Moody’s SF Japan KK are FSA registered credit ratings, but are not NRSRO credit ratings.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.


Chiharu Nagayoshi
Analyst
Structured Finance Group
Moody’s SF Japan KK
Atago Green Hills Tower Mori 20fl
2-5-1 Atago, Minato-ku
Tokyo, 105-6220
Japan
JOURNALISTS: 81 3 5408 4220
Customer service: 81 3 5408 4210

Mary Lam
Associate General Manager
Structured Finance Group
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Release Office:
Moody’s SF Japan KK
Atago Green Hills Tower Mori 20fl
2-5-1 Atago, Minato-ku
Tokyo, 105-6220
Japan
JOURNALISTS: 81 3 5408 4220
Customer service: 81 3 5408 4210

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