(The following was released by the rating agency)
TOKYO (Standard & Poor's) Jan. 10, 2013--Nippon Standard & Poor's (NSP) today said that it has assigned its preliminary 'AAA (sf)' ratings to Driver Japan Two's JPY25.0 billion beneficial interests and asset-backed loan (ABL) due June 2021. The collateral comprises Japanese auto loan receivables that Volkswagen Financial Services Japan Ltd. (VWFSJ) originated.
The originator will entrust a pool of auto loan receivables and cash with DB Trust Company Ltd. Japan (trustee 1). The originator will receive the senior beneficial interest and subordinate beneficial interest. The senior beneficial interest will fully redeem in a lump sum after trustee 1 obtains ABL 1. Mitsubishi UFJ Morgan Stanley Securities Co. Ltd. and Goldman Sachs Japan Co. Ltd. (the ABL 1 lenders) will entrust ABL 1 with DB Trust Company Ltd. Japan (trustee 2), and then transfer the beneficial interests (beneficial interests 2) to investors. Investors may also choose to lend money through an ABL (ABL 2) instead of purchasing the beneficial interests 2 from the ABL 1 lenders. We have assigned preliminary ratings to the beneficial interests 2 and ABL 2 issued/extended under this transaction. The preliminary ratings reflect our opinion on the likelihood of the full and timely payment of interest and the ultimate full repayment of principal by the transaction's legal final maturity date in June 2021. We base the preliminary ratings on information as of Jan. 10, 2013. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.
The preliminary ratings reflect our views primarily on the following factors:
-- The credit risk and future performance of the collateral assets, which we have estimated through our analysis of the characteristics of these assets, as well as historical data and other factors;
-- Credit support for the credit risk of the underlying assets, provided through overcollateralization;
-- Advance payment collections to mitigate commingling risk;
-- Cash reserves to be funded on the transaction's closing date to provide liquidity support to the transaction upon the occurrence of a servicer replacement;
-- The ability of VWFSJ as the initial servicer and JACCS and Cedyna as the subservicers to fulfill their roles in the transaction;
-- The payment structure and cash flow mechanisms, including the establishment of early amortization triggers that will convert principal payments to a sequential, monthly pass-through turbo structure under certain adverse circumstances; and
-- The transaction's legal structure, including that the entrustment of the underlying assets will not be considered as security interest and thus the underlying assets will not be considered as part of the originator's property in the event of the originator's bankruptcy.
"Counterparty Risk Framework Methodology And Assumptions," Nov. 29, 2012
"Japan ABS 2012 Outlook: Postdisaster Performance Will Likely Be Stable," June 5, 2012
"Japanese Structured Finance Scenario And Sensitivity Analysis: The Effects Of Major Macroeconomic Factors," April 6, 2012
"Principles Of Credit Ratings," Feb. 16, 2011
"Insight Into Structured Finance Transactions Backed By Various Types Of Auto Loans In Japan," Dec. 27, 2010
"Rating Methodology And Assumptions For Auto Loan-Backed ABS Transactions In Japan," Jan. 10, 2008
Driver Japan Two
JPY25.0 billion beneficial interests and ABL due June 2021*
Class Rating Issue amount* Coupon type O/C ratio
Beneficial interests 2 AAA (sf) JPY12.5 bil. Fixed rate 7.5%
ABL 2 AAA (sf) JPY12.5 bil. Fixed rate 7.5%
*The aggregate issue amount and the breakdown of the issue amounts of the beneficial interests 2 and ABL 2 are tentative and may be changed by the closing date.
The transaction will close on Feb. 27, 2013.
The basic approach to calculating the overcollateralization (O/C) ratio is as follows:
A: the rated obligations and equally ranked obligations
B: prior obligations to the rated obligations
C: underlying assets (including cash)
D: liquidity reserves
E: obligations, except for senior, mezzanine, or subordinate obligations (seller's interest, etc.)