Reuters logo
Fitch Assigns Expected Ratings to OSCAR US 2017-1
March 6, 2017 / 9:12 AM / 8 months ago

Fitch Assigns Expected Ratings to OSCAR US 2017-1

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: OSCAR US Funding VI 2017-1 here TOKYO, March 06 (Fitch) Fitch Ratings has assigned expected ratings to the notes to be issued by OSCAR US Funding VI LLC. The transaction is ultimately backed by a pool of auto loan receivables originated by Orient Corporation (Orico). The expected ratings are as follows (amounts are preliminary and subject to change): USD52.6m Class A-1 notes (initial credit enhancement (CE): 85.0%): 'F1+(EXP)sf'; USD136.8m Class A-2a/A-2b notes (initial CE: 46.1%): 'AAA(EXP)sf'; Outlook Stable USD66.7m Class A-3 notes (initial CE: 27.1%): 'AAA(EXP)sf'; Outlook Stable USD58.8m Class A-4 notes (initial CE: 10.4%): 'AAA(EXP)sf'; Outlook Stable JPY500.0m A-5 senior Beneficial Interests (BIs): 'NR(EXP)sf' JPY2,400.0m Class M loan: 'NR(EXP)sf' JPY1,263.2m Subordinated BIs: 'NR(EXP)sf' Subordination ratios are calculated using the following formula: (A+B)/C A: subordinated BIs (excluding the portion corresponding to the cash reserve) B: senior BIs ranked junior to the rated debt and Series M Loan C: total principal balance of the underlying auto loan receivables Final ratings are contingent on receipt of final documentation conforming to information already received and review of legal opinions. As of the cut-off date, the collateral pool consisted of auto loan receivables with a total principal balance of JPY40.1bn. All loan receivables are fully amortising with equal monthly instalments and a weighted-average remaining term of 55 months. KEY RATING DRIVERS Sufficient Credit Enhancement: OSCAR US Funding VI 2017-1 incorporates sufficient CE so that all classes of the rated notes can withstand Fitch's 'AAAsf' stress scenario with its base case cumulative default of 1.55%. In addition to the CE, excess spread available in the trust interest distribution will provide additional credit support to the transaction. Mezzanine and Subordination Amortisation: Class M Loan and subordinated BIs will be redeemed in accordance with the transaction documents. Fitch customised its cash flow model to reflect the transaction specific flow of funds and analysed whether the structure is able to withstand 'AAAsf' stress scenarios. Adequate Liquidity: Liquidity support will be provided by the cash reserve. The reserve will initially be funded on the closing date by the entrustment of cash. This will cover expenses for servicer replacement, a four-month interest rate payment and ongoing transaction costs. Mitigated Transfer and Convertibility Risk: The notes will be issued in a foreign currency; hence, the transaction is potentially exposed to transfer and convertibility (T&C) risk. However, Fitch expects this risk to be sufficiently mitigated in the transaction structure, where US dollar payments will be made outside Japan from the swap counterparty to the note paying agent. EXPECTED RATING SENSITIVITIES An unexpected increase in the cumulative default rate and decrease in the asset yield could produce loss levels higher than Fitch's base case, which could in turn result in negative rating action on the notes. Fitch has evaluated the sensitivity of the expected ratings to an increased cumulative default rate and decreased asset yield. Its analysis found the class A-4 notes displayed sensitivity to increased defaults, showing a downgrade of one notch to 'AA+(EXP)sf' under Fitch's mild (10% increase) and moderate (25% increase) default scenarios and a downgrade of four notches to 'A+(EXP)sf' under Fitch's severe scenario (50% increase). In the decreased asset yield scenario, where the weighted-average asset yield is decreased, the expected rating of the class A-4 notes was affected under the moderate (25% decrease) and severe (50% decrease) stress scenarios, falling to 'AA+(EXP)sf' and 'A(EXP)sf', respectively. The analysis also showed that under a combination of mild, moderate and severe stresses on the cumulative default rate and asset yield, the class A-4 notes would be downgraded to 'AA+(EXP)sf', 'A+(EXP)sf' and 'BBB(EXP)sf', respectively. The expected rating of the class A-3 notes declined to 'A+(EXP)sf' under the severe combination scenario. A foreign-currency note can exceed the Country Ceiling of the country of the assets or the issuer by up to four notches if T&C risk is mitigated in the transaction structure. Japan's Country Ceiling is currently 'AA'. A downgrade of the Country Ceiling to 'A' or lower would result in a downgrade of the notes. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016. DATA ADEQUACY Fitch expects to receive the final agreed upon procedures report before assigning the final ratings. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. Fitch's key rating drivers and expected rating sensitivity analysis are discussed further in the corresponding presale report entitled "OSCAR US Funding VI 2017-1", published today. SOURCES OF INFORMATION The information below was used in the analysis: Historical performance data provided by Mizuho Securities Co., Ltd. on delinquencies, defaults and prepayments up to December 2016 Transaction documentation provided by Mizuho Securities Co., Ltd. Contacts: Primary Analyst Hitoshi Hibino Associate Director +81 3 3288 2631 Fitch Ratings Japan Limited Kojimachi Crystal City East Wing 3rd Floor 4-8 Kojimachi, Chiyoda-ku Tokyo 102-0083 Secondary Analyst Atsushi Kuroda Senior Director +81 3 3288 2692 Committee Chairperson Natasha Vojvodic Senior Director +61 2 8256 0350 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016) here Criteria for Country Risk in Global Structured Finance and Covered Bonds (pub. 26 Sep 2016) here Global Consumer ABS Rating Criteria (pub. 01 Dec 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Related Research OSCAR US Funding VI 2017-1 - Appendix here Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020082 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below