Driver Japan Two
Rated Instruments: Trust Beneficial Interest
and ABL in Trust 2
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Structured Finance Credit Report
Volkswagen Financial Services Japan Ltd.
Table of Contents
I
OUTLINE OF THE STRUCTURE ........................................................ 2
II
CREDIT RATING ..................................................................... 2
III
ABOUT INSTRUMENT ................................................................ 3
IV
１．
About Instrument ................................................................ 3
２．
Outline of the Scheme ............................................................ 3
３．
Flow of Scheme ................................................................. 4
４．
Overview of Underlying Assets ..................................................... 8
５．
Overview of the Originator........................................................ 12
６．
Overview of Sub-Servicers ....................................................... 12
RATIONALE FOR RATING ............................................................ 14
１．
Risk Associated with Structure.................................................... 14
(１)
Structure of Asset Transfer .................................................... 14
(２)
Structure of Asset Holding (SPV) ................................................ 15
(３)
Structure of Asset Administration ............................................... 15
(４)
Structure of Waterfall ......................................................... 16
２．
Risk Associated with Underlying Assets............................................. 16
(１)
３．
Credit Risk Factors Associated with Underlying Assets .............................. 16
Cash Flow Risk Analysis ......................................................... 18
(１)
Establishment of Standard Scenario .............................................. 21
(２)
Establishment of Stress Multiple Scenario......................................... 25
(３)
Cash Flow Test............................................................... 26
(a)
About Receivables Pool that Change during the Revolving Period ................... 26
(b)
Commingling Risk .......................................................... 27
(c)
Payment Suspension Risk.................................................... 27
(４)
４．
Results ..................................................................... 27
Comprehensive Evaluation ........................................................ 27
V
INFORMATION CONCERNING LOSSES, CASH FLOW AND SENSITIVITY ANALYSIS ........... 27
VI
RATING METHODOLOGY ............................................................ 28
Copyright(C) 2013 Rating and Investment Information, Inc. All rights reserved.
1
This is a SF Credit Report concerning the rating action taken on February 26, 2013.
This SF Credit Report is an English Translation of the original SF Credit Report in Japanese
I
・
・
・
-
II
OUTLINE OF THE STRUCTURE
This instrument represents a securitization transaction backed by auto loan receivables held
by Volkswagen Financial Services Japan Ltd. (“VWFSJ”). This scheme consists of two trusts:
Trust 1 and Trust 2. A Revolving Period of one year is set for Trust 1.
The flow of this scheme is such that, first of all, VWFSJ transfers auto loan receivables and
money to Trust 1 and receives the Senior Beneficial Interest and the Subordinated Beneficial
Interest. The trustee of Trust 1 (“Trustee 1”) borrows a limited recourse loan (ABL1) from
Goldman Sachs Japan Co., Ltd. (“GS”) and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
(“MUMSS”) with trust assets as recourse assets, and thereby redeems the Senior Beneficial
Interest of Trust 1 in full. Next, GS and MUMSS transfer the ABL (ABL1) to Trust 2 and
receive trust beneficial interest, and transfer part of the trust beneficial interest to the
investors. As regards the remainder of the trust beneficial interest, the trustee of Trust 2
(“Trustee 2”) borrows from the investors a limited recourse loan (ABL2) with trust assets as
recourse assets, and thereby redeem the trust beneficial interest of the same amount.
The products to be rated are the trust beneficial interest and the ABL in Trust 2.
Trust 2 repays the principal and interest of the ABL (ABL2) and the trust beneficial interest
with the principal and interest received from Trust 1 in relation to the ABL (ABL1). For this
reason, the auto loan receivables being the underlying assets of the ABL in Trust 1 effectively
constitute the underlying assets of the trust beneficial interest and the ABL in Trust 2.
CREDIT RATING
INSTRUMENT NAME
RATING ACTION
R&I RATING
NOTE
INSTRUMENT NAME
RATING ACTION
R&I RATING
NOTE
Driver Japan Two Trust Beneficial Interest
Assignment of a rating
Long-term Issue Rating ／ AAA
The rating is an assessment of the probability that the principal of the
Trust Beneficial Interest will be paid in full by the trust termination date
and the interest will be paid on a timely basis.
Driver Japan Two ABL
Assignment of a rating
Long-term Issue Rating ／ AAA
The rating is an assessment of the probability that the principal of ABL
will be paid in full by the trust termination date and the interest will be
paid on a timely basis.
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2
III ABOUT INSTRUMENT
１．
About Instrument
TRUSTOR
Volkswagen Financial Services Japan Ltd.
INSTRUMENT NAME
AMOUNT
(CURRENCY)
Date of Issue
Sub.
Ratio
(*1)
Driver Japan Two
Trust Beneficial Interest
Driver Japan Two
ABL
Yen 18,400,000,000
(JPY)
UNDERLYING
ASSET
Auto Loan
Redemp-
Sched. Maturity
Legal Maturity
tion
(*2)
Feb 27, 2013
－
7.5%
Coupon
Type/Rate
PT
Fixed
－
Jun 28, 2021
Yen 9,600,000,000
(JPY)
Feb 27, 2013
－
7.5%
PT
Fixed
Jun 28, 2021
(*1) Sub. Ratio: Subordination Ratio
(*2) Redemption Method: PT: Pass-Through
２．
Outline of the Scheme
【Parties Involved】
（TRUST 1）
ROLE
NAME
Originator / Trustor of Trust 1 /
Servicer / Subordinated
VOLKSWAGEN FINANCIAL SERVICES JAPAN LTD.
Beneficiary
Trustee of Trust 1
DB TRUST COMPANY LIMITED JAPAN
GOLDMAN SACHS JAPAN CO., LTD.
ABL Lender to Trust 1
MITSUBISHI UFJ MORGAN STANLEY SECURITIES CO., LTD.
JACCS CO., LTD.
Sub-Servicer
CEDYNA FINANCIAL CORPORATION
Bank where Trust 1 collection
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
account is established
Backup Servicer
Initially no backup servicer will be designated.
（TRUST 2）
ROLE
Trustor of Trust 2
Bank where Trust 2 collection
account is established
Trustee of Trust 2
NAME
GOLDMAN SACHS JAPAN CO., LTD.
MITSUBISHI UFJ MORGAN STANLEY SECURITIES CO., LTD.
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
DB TRUST COMPANY LIMITED JAPAN
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3
－
【OUTLINE OF THE SCHEME】
Obligors
Interest /principal
payments
Auto Loan
Agreement
Cedyna/JACCS
（Sub-Servicer）
Administrative
Services
Agreement
Interest /principal
payments
Investors
(Trust Beneficial
Interest)
VWFSJ
（Originator/ Servicer/
Trustor of Trust 1）
Transｆer
of
collected
funds
Senior/
Subordinated
Trust
Beneficial
Interest
Trust of
autoloan
receivables
DB Trust
(Trustee of Trust 1)
Redemption
of Senior
Trust
Beneficial
Interest
Purchase
Price
Interest/principal
payment on
Trust Beneficial
Interest
Trust
Beneficial
Interest
Interest/principal
payment on ABL2
ABL
execution
(ABL2)
Trust of ABL(ABL1)
ABL
execution
(ABL1)
GS/MUMSS
(Initial ABL Lender
to Trust 1/ Trustor
of Trust 2)
Trust Beneficial
Interest
Redemption of
Trust Beneficial
Interest
ABL1 interest/principal
３．
Investors
(ABL2)
DB Trust
(Trustee of
Trust 2)
Flow of Scheme
< Trust 1>
1. Volkswagen Financial Services Japan Ltd. (VWFSJ) transferred auto loan receivables and
money to DB Trust Company Limited Japan (Trustee 1), based on a trust agreement (Trust 1).
The transfer will be perfected as against any third party by registration pursuant to the Law
Regarding Special Exceptions to the Civil Code with Respect to Perfection Requirements for
Assignment of Movables and Claims. Perfection of the transfer as against the obligors will be
reserved until the events provided in the trust agreement have occurred.
2. Trustee 1 divides the Trust Beneficial Interest into Senior and Subordinated portions, and
transfers the trust beneficial interests to VWFSJ. Trustee 1 borrows a limited recourse loan
(ABL 1) from Goldman Sachs Japan Co., Ltd. (GS) and Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd. (MUMSS) with trust assets as recourse assets, and redeems the full
amount of the Senior Beneficial Interest. VWFSJ continues to hold the Subordinated
Beneficial Interest.
3. Trustee 1 entrusts to VWFSJ, and VWFSJ entrusts to sub-servicers, Cedyna Financial
Corporation (Cedyna) and JACCS CO., LTD.(JACCS), a portion of the trust business affairs
including the collection activity of the respective auto loan receivables. Sub-servicers collect
the auto loan receivables from the obligors and transfer the funds to VWFSJ, and VWFSJ
transfers the collected funds it has received from sub-servicers to Trustee 1 by the end of the
same day. VWFSJ advances the scheduled collection amount to Trustee 1 by four business
days before the Trust 2 Payment Date.
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4
(During the Revolving Period)
1. Provided certain criteria are met by the additional trust date, VWFSJ can transfer additional
trust receivables to Trust 1. When there is an additional entrustment, Trustee 1 will establish
an Additional Senior Beneficial Interest and an Additional Subordinated Beneficial Interest,
and transfer the interests to VWFSJ.
2. On each calculation date during the revolving period, Trustee 1 pays various costs and the
interest on ABL 1 from the collected funds and subsequently redeems the Additional Senior
Beneficial Interest. Since the additional trust loan receivables amount is determined so that
the Additional Senior Beneficial Interest after redemption is always zero, there will never be
an outstanding amount of Additional Senior Beneficial.
3. Trustee 1 pays the principal of the Subordinated Beneficial Interest to the extent that certain
level of credit enhancement stipulated in the trust agreement is satisfied and pays any
remaining funds in the trust collection account as interest on subordinated beneficial interest.
If there are no principal repayments on the Subordinated Beneficial Interest, interest
payments on the Subordinated Beneficial Interest will not be made.
(After the Revolving Period)
1. After Trustee 1 pays various costs and the interest on ABL 1 from the collected funds, it will
allocate funds to the repayment of ABL 1 according to the “ABL Principal Payment Amount”
stipulated in the trust agreement.
2. Trustee 1 will pay the principal of the Subordinated Beneficial Interest to the extent that
certain level of credit enhancement stipulated in the trust agreement is satisfied.
3. However, following an early redemption event, Trustee 1 will halt interest and principal
payments on the Subordinated Beneficial Interest.
< Trust 2>
1. GS and MUMSS transfer to DB Trust Company Limited Japan (Trustee 2) the ABL 1 made to
Trustee 1 (Trust 2). The transfer will be perfected as against the obligor and any third party by
notice under Article 467 of the Civil Code and Article 24 of the Money Lending Business Act.
2. Trustee 2 transfers 28 billion yen in the Trust Beneficial Interest to GS and MUMSS.
3. Trustee 2 borrows from the investors 9.6 billion yen in a limited recourse loan (ABL 2) with the
trust asset as a recourse asset, and redeems the Trust Beneficial Interest.
4. GS and MUMSS transfer 18.4 billion yen in the Trust Beneficial Interest received from
Trustee 2 to investors. The transfer will be perfected as against the trustee and any third
party by written consent from the trustee with a certified date, based on Article 94 of the Trust
Act.
5. Trustee 2 makes principal and interest payments on the Trust Beneficial Interest and ABL 2
using the ABL 1 principal and interest payments, etc. received from Trustee 1. Because there
are no principal repayments on ABL 1 during the Revolving Period of Trust 1, Trust 2 will not
make any principal repayments on the Trust Beneficial Interest and ABL 2.
【Main Early Redemption Events for Trust 1】
・ When a Level 2 Credit Enhancement Increase Condition is hit
・ When a servicer replacement event has occurred
・ When a sub-servicer replacement event has occurred
・ When, additional receivables are not entrusted during the Revolving Period, and the
percentage of trust assets accounted for by cash (excluding the cash reserve fund) has
exceeded 10% for three months in a row.
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5
【Characteristics of Waterfall for Trust 1】
・ The level of credit enhancement for determining the redemption amount of the Subordinated
Beneficial Interest is prescribed in the table below. According to the performance of
underlying assets, the level of credit enhancement to be maintained is set to rise.
Conditions
Before Level 1 Credit Enhancement Increase Condition is hit During the Revolving Period
After the Revolving Period
Level 1 Credit Enhancement Increase Condition is hit
Level 2 Credit Enhancement Increase Condition is hit
Ｌevel of Credit Enhancement
9.50%
12.50%
17.00%
Stop interest and principal payments on
Ｓubordinated Beneficial Interest
※Credit Enhancement Increase Conditions are as follows:
・ A "Level 1 Credit Enhancement Increase Condition" shall be deemed to be in effect if the
Cumulative Gross Loss Ratio exceeds (i) 0.50% for any Trust Calculation Date on or prior to
August 2013, (ii) 0.80% for any Trust Calculation Date from September 2013, to May 2014
(inclusive), or (iii) 1.15% for any Trust Calculation Date from June 2014 to February 2015
(inclusive).
・ A "Level 2 Credit Enhancement Increase Condition" shall be deemed to be in effect if the
Cumulative Gross Loss Ratio exceeds 1.60% for any Trust Calculation Date.
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6
【Water Fall】
（Trust 1）
Trust Collection
Account
Cash Reserve
Account
①
②
①
②
trust fees for Trust 1
(including overdue and unpaid)
①
②
Servicing Fee (including overdue and unpaid)
①
②
Trust Expenses
（including the Trust Expenses of Trust 2）
①
②
①
②
①
taxes and public charges (including overdue and unpaid)
payment to Trust 2 of interest on the Trust 1 ABL (ABL1) which is overdue and unpaid
payment to Trust 2 of interest on the Trust 1 ABL (ABL1)
an amount needed to meet the Cash Reserve Necessary Amount
①
(i) During the Revolving Period:
full redemption of Additional Senior Beneficial Interest
(ii) After Revolving Period and before occurrence of an early redemption event:
payment of "ABL Principal Payment Amount" to Trust 2
(iii) At the time of occurrence of an early redemption event:
payment to Trust 2 on a pass-through basis until the remaining principal balance of the
Trust 1 ABL(ABL1) becomes zero
①
the payment to Trutee of the Trust 1 of any Indeminified Amounts which are not yet paid
by the Trustor of the Trust 1 (if any)
①
the payment to the Subordinated Beneficiary of the Subordinated Beneficial Interest
Principal Payment Amount
①
Retained in Trust
(i) During the Revolving Period:
(If the principal is paid to the Subordinated Beneficiary): any remaining funds are to be paid
as subordinated interest to the Subordinated Beneficiary.
(If the principal is not paid to the Subordinated Beneficiary): any remaining funds are to be
retained in the trust.
(ii) After Revolving Period and before occurrence of an early redemption event: any
remaining funds are to be paid as subordinated interest to the Subordinated Beneficiary.
(iii) At the time of occurrence of an early redemption event: any remaining funds are to be
retained in the trust.
（Trust 2）
Payment
Account
①
taxes and public charges (including overdue and unpaid)
①
trust fees for Trust 2
(including overdue and unpaid)
①
①
Trust Expenses
payment of interest to the Beneficiaries and ABL Lenders of Trust 2 which is overdue and
unpaid
①
payment of interest to the Beneficiaries and ABL Lenders of Trust 2
①
payment of principal to the Beneficiaries and ABL Lenders of Trust 2
①
the payment to Trutee of the Trust 2 of any Indeminified Amounts which are not yet paid
by the Trustor of the Trust 2 (if any)
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7
４．
Overview of Underlying Assets
【Types of Underlying Assets】
The underlying assets are the auto loan receivables of VWFSJ. The entrusted receivables
are one of the seven types of auto loan agreement described in Table 1 below. Residual value /
balloon payment auto loans that set a large repayment amount (balloon payment) at the time
of final payment is included. By product composition, Owner’s Plan, Solutions and S Loan
jointly account for 94.92% of the entire securitization pool.
(Table 1)
Balloon Percent of pool
payment (as of Feb 2013)
Loan agreement (Name)
Contents
Owner’s Plan
Normal installments (no balloon payment set)
－
25.87%
Twin Loan
Comprised of two components with a regular interest rate and
advantageous interest rate (no balloon payment set)
－
0.19%
Refinance loan (Solutions)
Refinancing loan of Solutions
－
1.28%
Refinance loan (S Loan etc.)
Refinancing loan of S Loan and S Loan Plus
－
0.59%
Solutions
Residual value / balloon payment auto loan
(with purchase guarantee from VWFSJ or dealer)
(only new VW vehicles are eligible)
○
39.87%
S Loan (including Das WeltAuto loan)
Residual value / balloon payment auto loan (no purchase guarantee)
○
29.18%
S Loan Plus
Residual value / balloon payment auto loan (with dealer purchase
guarantee requiring purchase of a new Audi automobile)
○
3.02%
【Origination of Underlying Assets】
VWFSJ outsources credit screening and collection of auto loans to Cedyna of Sumitomo
Mitsui Financial Group and JACCS of Mitsubishi UFJ Financial Group under the
Administrative Services Agreement. The entrusted receivables are jointly and severally
guaranteed by Cedyna or JACCS.
(Figure 1)
Sales Contract
Dealer
Customer
Car
Purchase
Advance
payments
Affiliate
Agreement
Servicer
(VWFSJ)
Payments
Auto Loan
Agreement
Guarantee fee
Guarantor
Agreement
Sub-Servicer
(Cedyna/JACCS)
Consignment Agreement
Guarantee Agreement
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8
【Method of Final Repayment of Residual Value / Balloon Payment Auto Loans】
Residual value / balloon payment auto loans offer multiple redemption options for the final
repayment, and options differ according to the loan. Under the trust agreement, if an application
for a refinance option is submitted, VWFSJ would make a lump-sum advance for the final
repayment amount. In the event of the bankruptcy of VWFSJ, Trustee 1 plans not to accept
refinance option.
Redemption method options at time of final repayment （Table ２）
Loan agreement
Lump-sum repayment
Refinancing
(Name)
Solutions
○
○
S Loan
○
○
S Loan Plus
○
○
Vehicle return
○
－
－
-“Lump-sum repayment” (of balloon portion)… An obligor’s own funds or car sale proceeds are
used to make the final repayment.
-“Refinancing” … A new loan agreement is entered into between the obligor and VWFSJ. Loan
amount is the same amount as the final payment amount, and the proceeds of the newly entered
loan is allocated to the final repayment on the old loan.
-“Vehicle return” … An obligor returns the vehicle to the entity that offered the vehicle purchase
guarantee (VWFSJ or a dealer), and the sale proceeds of the vehicle is used to make the final loan
payment. The residual value is set so that the final repayment amount can be paid with the
purchase guarantee amount.
【Residual Value / Balloon Payment Auto Loans with Purchase Guarantee】
Of the residual value / balloon payment auto loans, Solutions and S Loan Plus come with
purchase guarantee. VWFSJ’s policy of setting residual value ratio, level, and its track record of
exercise of purchase guarantee are as follows:
-VWFSJ sets residual value ratio under the policy of setting residual value ratio in such a manner
as to allow the final repayment amount to be repaid fully with the vehicle sale proceeds.
-Cedyna and JACCS as joint and several guarantors verify the level of residual value ratio set by
VWFSJ by checking it against the methods of setting their own residual value ratio.
-According to the used car price information provided by the originator, the standard basic level of
residual value ratio set by VWFSJ is equivalent to or lower than the wholesale price for used cars.
-According to the historical data for nearly three years from January 2010 to October 2012, the
percentage of obligors who used the purchase guarantee from VWFSJ for Solutions remains in the
vicinity of 2%. In addition, a year-by-year review of VW vehicle sale price reveals that it has
exceeded vehicle acquisition costs including value assessment fee and other miscellaneous costs
and no loss has been incurred.
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9
Vehicle purchase guarantor （Table ３）
Loan agreement (Name)
Dealer
Solutions
○
S Loan
－
S Loan Plus（※）
○
VWFSJ
○
－
－
※“S Loan Plus” is an auto loan agreement with a dealer purchase guarantee requiring the purchase of a new Audi automobile.
VWFSJ standard basic residual value ratio （Table ４）
After
After
Loan agreement (Name)
1 year
2 years
Solutions
－
50％
S Loan
60%
50％
S Loan Plus
60%
50％
After
3 years
40％
40％
40％
After
4 years
30％
30％
30％
After
5 years
20％
20％
20％
Note: As of the forth quarter of 2012
【Flow of Determining the Method of Final Repayment of Residual Value Auto Loan】
The method of final repayment on a residual value auto loan is not decided when the original
loan agreement is signed. The method of final repayment is determined when the obligor makes a
selection from the options described on a form that is sent three months before the final payment.
Therefore the decision on the final payment is made during the period between three months to
one month before the final payment month.
For the purchase guarantee amount of Solutions and S Loan Plus, the purchase price is decided
in the form of a “Confirmation Form” when the vehicle purchase agreement is signed.
（Figure ２）
(t-3)/
X
(t-2)/
X
(t-1)/
X
Obligor decides method of final
payment
(Period during which obligor can
apply for purchase guarantee
payment option)
Loan/
written
confirmation
signed
Explanation of options at
time of final payment is
sent to obligor
Period during when obligor chooses method of final payment
※X is 27 for JACCS and 26 for Cedyna.
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10
(t)/
X
Option
exercise
date
【Main Eligibility Criteria of Underlying Assets of Trust 1】
・ Auto Loan Receivable is not overdue on the relevant Cut-off Date;
・ Auto Loan Receivables are jointly and severally guaranteed by Cedyna or JACCS;
・ On the relevant Cut-off Date, Auto Loan amount / per loan is (i) greater than ¥50,000 and (ii)
less than ¥10,000,000;
・ At least two monthly payments have been made in respect of each Auto Loan Receivable; and
・ All monthly payments in respect of each Auto Loan Receivable are required to be made within
84 months after the date of origination of such Auto Loan Receivables.
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11
５．
Overview of the Originator
Volkswagen Financial Services Japan (“VWFSJ”), established on September 5, 1990, is a
wholly-owned consolidated subsidiary of Volkswagen Financial Services AG (Germany), which
in turn is a wholly-owned consolidated subsidiary of Volkswagen AG (Germany).
The brands handled by the Volkswagen Group in Japan are Volkswagen, Audi, Bentley, and
Lamborghini. VWFSJ performs financing services for customers as it sells the Volkswagen
Group’s cars in Japan. VWFSJ conducts dealer management on the basis of VWFS’s global
standard. As of the end of December 2011, the Volkswagen Group’s authorized dealers in
Japan numbered 245 for Volkswagen, 105 for Audi, 6 for Bentley, and 4 for Lamborghini.
According to Japan Automobile Importers Association (JAIA) statistics, in 2011 the
Volkswagen Group accounted for a 37.1% share of registrations of new imported passenger
vehicles manufactured by foreign automakers. By brand, the Volkswagen alone occupied the
top rung, boasting a 24.8% share, and the Audi brand had a 10.4% share.
In addition, according to the Change in Number of Top-selling Imported Models Sold
(Calendar Year) prepared by the association, Volkswagen’s Golf model continuously reigned
in first place between 2003 and 2011, while the brand’s Polo model ranked second in 2010 and
2011 and remained in the seven highest ranking between 2003 and 2009.
６．
Overview of Sub-Servicers
VWFSJ outsources credit and collection services to Cedyna and JACCS. These services for
entrusted receivables are allocated to Cedyna and JACCS basically by the dealer and
according to business areas, and adjustments in such apportionment are sometimes made by
taking into consideration the balance of the outstanding claims between these companies.
【Cedyna Financial Corporation】
On the occasion of the merger in April 2009 of Central Finance Co., Ltd., OMC Card, Inc.
and QUOQ Inc., the corporate name was changed to Cedyna. Cedyna was established as a
core company in the personal finance division of the Sumitomo Mitsui Financial Group, and
became a wholly-owned subsidiary of SMFG Card & Credit, Inc. through stock swap in May
2011.
In addition to credit card business, Cedyna handles auto leans, home improvement loans
and a multitude of other products in the field of consumer credit business. Cedyna’s
relationship with VWFSJ dates back to 2002 when the former Central Finance had a business
tie-up with VWFSJ. It has since performed credit and collection services for VWFSJ.
Credit service: Cedyna performs credit screening by scoring for VWFSJ, in roughly the
same manner as in the case of its own auto loans.
Collection service: Installment payments from obligors are at the debit of their bank deposit
accounts, on the 26th of each month. If Cedyna makes any payment in subrogation, Cedyna
would collect such payment as its own receivable.
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12
【JACCS CO., LTD.】
JACCS, an equity-method affiliate of The Bank of Tokyo-Mitsubishi UFJ, Ltd., is a leading
consumer credit company that operates individual credit purchase intermediary business for
the Mitsubishi UFJ Financial Group, and a fair amount of strategic importance is recognized.
JACCS has a low risk appetite among consumer credit companies, and sustains conservative
credit service.
Its business segments are divided into credit business (general monthly installment sales
and auto loans), credit card business, and finance business (mortgage loan guarantee, bank
personal loan guarantee, and collection agency service). Among Japanese firms, JACCS has a
top-tier operating base in the fields of individual credit purchase intermediary business and
personal loan guarantee. JACCS’s relationship with VWFSJ dates back to 2007, and JACCS
has since performed credit screening and collection services for VWFSJ.
Credit screening service: credit criteria for auto loan receivables entrusted by VWFSJ are
roughly the same as those for JACCS’ own auto loans. Automatic judgment is made by system
first, and then additional screening would be performed as needed.
Collection service: Installment payments from obligors are at the debit of their bank deposit
accounts, on the 27th of each month. If JACCS makes any payment in subrogation, JACCS
would collect such payment as its own receivable.
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13
IV RATIONALE FOR RATING
For the purpose of rating analysis of this instrument, R&I sought to understand the actual
conditions of transactions by identifying and analyzing factors that lie behind risks associated with
structures and the underlying assets respectively. R&I conducted a comprehensive evaluation by
performing a cash flow analysis on the basis of the outcome of an analysis of these risk factors and
then by taking into account the outcome of the analysis of those risk factors that are not worked
into the cash flow risk analysis.
１．
Risk Associated with Structure
(１)Structure of Asset Transfer
（a）Conflict of Interest between Originator and Investors：
Appropriate selection criteria and other transfer-related procedures that fit in
with the characteristics of the underlying assets are clearly prescribed. The
structure is such that VWFSJ would bear any loss on securitization products
ahead of the investors by virtue of the fact that VWFSJ holds the Subordinated
Beneficial Interest. Therefore, measures for preventing VWFSJ from causing any
credit loss to the investors for the purpose of maximizing its own profits are in
place, and hence there is no problem in assigning a rating.
（b）True Sale Risk of Trust 1：
The auto loan receivables as trust assets of Trust 1 would be perfected as
against any third party by ABL1 Drawdown Date or within five business days
from the Additional Entrustment Date pursuant to the Act on Special Exceptions
to the Civil Code with respect to Perfection Requirements for Assignment of
Movables and Claims. Perfection of the transfer as against any obligor would be
initially reserved; provided, however, that the trust agreement expressly provides
for the procedures for perfecting the transfer as against any obligor promptly in
the event of occurrence of a certain specific event.
R&I has confirmed that ample measures have been taken to assure the true
sales of Trust 1 from the perspectives of “the intentions of the parties,” “validity of
asset assignment (fulfillment of perfection requirement),” “transfer of legal control
authority” and “transfer of economic risks.” Transfer of the claims can be said to be
a true transfer.
（c）True Sale Risk of Trust 2：
Transfer of ABL1 to Trust 2 would be perfected as against any obligor or third
party on the date of commencement of Trust 2 on the basis of the notice to be given
pursuant to Article 467 of the Civil Code and Article 24 of the Money Lending
Business Act.
R&I has confirmed that ample measures have been taken to assure the true
sales of ABL1 to Trust 2 from the perspectives of “the intentions of the parties,”
“validity of asset assignment (fulfillment of perfection requirement),” “transfer of
legal control authority” and “transfer of economic risks.” Transfer of ABL1 can be
said to be a true transfer.
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14
(２)Structure of Asset Holding (SPV)
R&I evaluated the bankruptcy remoteness features of the SPV from the
perspectives of “business risk,” “capital relationship,” “personal relationship” and
“ring-fence.” This instrument adopts a two-tiered approach consisting of Trust 1
and Trust 2. Pursuant to the Trust Act, necessary measures under the trust
agreement are in place as seen from these four perspectives. Therefore, there is no
problem in assigning a rating.
(３) Structure of Asset Administration
（a）Servicer’s and Sub-Servicer’s Bankruptcy Risk (Commingling Risk)：
This instrument is of such a structure that VWFSJ as Servicer would make
advance payment of funds to be collected in the current month to Trust 1 four
business days prior to Trust 2 Payment Date (Advance Payment Date).
The trust agreement expressly stipulates that if the Servicer goes bankrupt
before the collected funds are handed over from the Sub-Servicer to the Servicer,
the Sub-Servicer which is entrusted with servicing would transfer the collected
funds directly to Trust 1 in accordance with the instructions of Trustee 1, and
hence there would be no problem. If the Servicer goes bankrupt after the collected
funds are handed over from the Sub-Servicer to the Servicer, there would be no
problem as the funds are paid in advance to Trust 1 on the Advance Payment
Date.
If the Servicer is existing but the Sub-Servicer which is entrusted with servicing
goes bankrupt prior to the date of handover of the collected funds, VWFSJ would
pay the collected funds under its own responsibility as Servicer. The relevant
debts are separated from VWFSJ’s creditworthiness by advance payments and
overcollateralization.
（b）Servicer’s Bankruptcy Risk (Liquidity Risk)：
The necessary cash reserve is set aside in Trust 1.
（c）Risk of Bankruptcy of the Financial Institution with Which Deposits Are Placed：
The trust agreement deals with the risk of bankruptcy of the financial
institution with which accounts of funds collected for Trust 1 and Trust 2 are
established by stipulating that the financial institution with which deposits are
placed would be changed according to a rating trigger. R&I has confirmed that the
rating trigger is at a valid level compared to a target rating, that the procedure for
changing the financial institution with which deposits are placed is in place if the
trigger is hit, and that the Issuer Ratings for the financial institutions with which
funds are initially placed are at adequate levels.
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15
（d）Risk of Value Diminution of Surplus Fund Investment：
The risk of value diminution of surplus fund investment is being dealt with by
limiting surplus fund investment to deposits placed with the eligible financial
institutions specified in the trust agreement. A rating trigger is set for the eligible
financial institutions. R&I has confirmed that the rating trigger is at a valid level
compared to a target rating, that the procedure for changing the financial
institution with which deposits are placed is in place if the trigger is hit, and that
the Issuer Ratings for the financial institutions with which funds are initially
placed are at adequate levels.
（e）Risk Associated with Business Framework of Material Parties Involved in the
Structure：
VWFSJ as Servicer outsources servicing activities to the Sub-Servicers. Cedyna
and JACCS as Sub-Servicers specialize in installment receivables’ credit and
collection services, and have an ample track record as servicers of securitization
transactions. The trust agreement for Trust 1 stipulates the procedures whereby,
in the event of the sub-servicer’s bankruptcy, VWFSJ as Servicer and the trustee
of Trust 1 jointly and promptly appoint a substitute sub-servicer.
(４)Structure of Waterfall
（a）Risk Associated with Waterfall：
Refer to page 26 for the risk that the quality of securitization pool would change
because the Revolving Period is set.
２．
Risk Associated with Underlying Assets
(１)Credit Risk Factors Associated with Underlying Assets
（a）Obligor’s Default Risk：
Necessary credit enhancement is assured by overcollateralization.
（b）Prepayment Risk：
The risk of dilution of future interest resulting from prepayment would be
limited by adopting a pass-through as redemption method.
（c）Dilution Risk Resulting from Cancellation：
Generally, a number of cancellations of auto loan receivables tend to occur
during the initial three months from the time of origination. As a record of two
payments is prescribed as the eligibility criteria, dilution risk resulting from
cancellation is limited.
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（d）Dilution Risk Resulting from Failure to Fulfill Duties：
If VWFSJ or the dealer providing purchase guarantee goes bankrupt, there
would be a risk that obligors may suspend payments on the grounds that the
option for the final payment cannot be exercised.
Of the seven loan types, the balloon portions of Solutions, S Loan and S Loan
Plus are subject to payment suspension risk, and there is no payment suspension
risk for the monthly installment portions which are not accompanied by
counter-performance.
The methods for the final repayment of residual value / balloon payment auto
loans include three options: “lump-sum repayment,” “vehicle return” and
“refinancing.” Of these options, only the refinance option has the intrinsic
payment suspension risk.
“Lump-sum repayment” would not pose any problem as there would be no
counter-performance from VWFSJ or the party providing purchase guarantee.
“Vehicle return” and loans with purchase guarantee are accompanied by
counter-performance, but if the vehicle can be sold at a price equal to or higher
than the purchase guarantee amount, there would be a low possibility that
payments might be suspended by obligors. The level of residual value ratio set for
determining the purchase guarantee amount is deemed to be reasonable given the
ratio-setting policy, verification of the ratio set, actual track record of use of
purchase guarantee and used car price information. (Refer to page 9-10) Even if
the party providing purchase guarantee goes bankrupt, there would be no
problem if there is a high probability that VWFSJ or another dealer will take over
such purchase guarantee. The trust agreement provides that even if it becomes
difficult to find a party who takes over purchase guarantee, the vehicle can be sold
by auction through Cedyna or JACCS as Sub-Servicer or through Trustee 1.
“Refinancing” is accompanied by counter-performance by VWFSJ, and hence
there would be a certain amount of risk that payment might be suspended in the
event of VWFSJ’s bankruptcy. However, risk remains only with respect to the
receivables for which the method for final repayment has been determined in the
event of VWFSJ’s bankruptcy. The method for final repayment would be
determined three months prior to the final payment due date at the earliest.
Therefore, the amount subject to payment suspension risk would be only limited
to the portion equal to three months of the balloon portion of the receivables for
which the “refinancing” option is selected.
With respect to dilution risk resulting from failure to fulfill duties,
substitutability of the duties has been taken into consideration, and adequacy of
credit enhancement to be set is confirmed.
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17
３．
Cash Flow Risk Analysis
【Application of Large Pool Approach】
This instrument is backed by a pool of auto loan receivables (securitization pool) which are
dispersed among a large number of small obligors, and cash flow analysis is performed by
applying the large pool approach.
【Characteristics of Receivables Pool】
In estimating the performance of the securitization pool of this instrument, analysis is
performed on the basis of VWFSJ’s reference pool (or mother pool). The characteristics of the
receivables pool are sorted out and the necessity for correction in calculating parameters
based on the reference pool is confirmed below.
[Historical Data Collected]


Cedyna-guaranteed receivables: from July 2002 to December 2012
JACCS-guaranteed receivables: from January 2007 to December 2012
Note) Of the historical data received by loan type, the longest data are indicated above.
The reference pool is the pool of the seven underlying loan types. The pool conforming to the
eligibility criteria (“eligible pool”) is the pool of the receivables which conform to the eligibility
criteria under the trust agreement, excluding what were securitized in the past. Although the
reference pool and the eligible pool differ somewhat from each other in terms of attribute
distribution of the remaining balance of receivables, remaining number of payments and
seasoning, data correction was considered unnecessary in calculating parameters based on
the reference pool, given the fact that there is a Revolving Period and the attributes would not
materially affect performance.
For each of Cedyna and JACCS, the eligible pool and the securitization pool (cut off as of
February 10, 2013) have no major difference in attribute distribution as the standard contract
terms, the credit screening and collection frameworks are the same.
Except for geographical distribution, there was no major difference between the attributes
of Cedyna-guaranteed and JACCS-guaranteed receivables. More than half of the pool of
Cedyna-guaranteed receivables is accounted for by Tokyo, Kanagawa and Aichi Prefectures,
while Osaka and Fukuoka Prefectures represent nearly 25% of the pool of JACCS-guaranteed
receivables. This was attributable to the fact that VWFSJ had previously selected guarantors
by dealer and by region. The combination of Cedyna-guaranteed receivables and
JACCS-guaranteed receivables has resulted in a geographically diversified pool for the
securitization.
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18
Comparison between eligible pool and securitization pool （Table 5）
Eligible Pool
Securitization Pool
（As of end-Nov. 2012）
（As of Feb. 10, 2013）
47,789
14,160
¥109,186,201,680
¥30,270,523,940
Monthly Installment Portion
¥78,525,971,680
¥21,248,170,133
Balloon Portion
¥30,660,230,000
¥9,022,353,807
Approx. \2.28 million
Approx. \2.14 million
Number of Loans
Principal Balance
Average Outstanding Principal Balance
Breakdown of securitization pool （Table 6）
Securitization Pool
Securitization Pool
（Guaranteed by Cedyna）
（Guaranteed by JACCS）
10,093
4,067
¥22,108,912,502
¥8,161,611,438
¥15,336,180,170
¥5,911,989,963
Number of Loans
Principal Balance
Monthly Installment Portion
¥6,772,732,332
¥2,249,621,475
Approx. \2.19 million
Approx. \2.01 million
Balloon Portion
Average Outstanding Principal Balance
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19
【Major Attribute Distributions】
 The attribute distributions of the pools of receivables that were randomly extracted from
the eligible pools as of December 10, 2012 and February 10, 2013, respectively, are shown
below. As both were randomly extracted, there was no major difference between both
attribute distributions.
Prefecture
25%
20%
15%
10%
5%
Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
Ibaraki
Tochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
Niigata
Toyama
Ishikawa
Fukui
Yamanashi
Nagano
Gifu
Shizuoka
Aichi
Mie
Shiga
Kyoto
Osaka
Hyogo
Nara
Wakayama
Tottori
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
Kagawa
Ehime
Kouchi
Fukuoka
Saga
Nagasaki
Kumamoto
Oita
Miyazaki
Kagoshima
Okinawa
0%
eligible pool as of end-Nov. 2012
cut off pool as of December 10, 2012
cut off pool as of February 10, 2013
Interest Rate paid by Obligor
35%
30%
25%
20%
15%
10%
5%
0%
< 0.900 %
0.900 % <
1.500 %
1.500 % <
2.000 %
2.000 % <
2.500 %
eligible pool as of end-Nov. 2012
2.500 % <
3.000 %
3.000 % <
3.500 %
3.500 % <
4.000 %
cut off pool as of December 10, 2012
4.000 % <
4.500 %
4.500 % <
5.000 %
5.000 % or
more %
cut off pool as of February 10, 2013
Original Term
70%
60%
50%
40%
30%
20%
10%
0%
6 - 12
13 - 18
19 - 24
25 - 30
eligible pool as of end-Nov. 2012
31 - 36
37 - 42
43 - 48
49 - 54
cut off pool as of December 10, 2012
55 - 60
61 - 66
67 - 72
cut off pool as of February 10, 2013
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20
73 - 84
(１)
Establishment of Standard Scenario
【Default rate】
・ Cedyna and JACCS guarantee their respective entrusted receivables, and if the obligors
default on their debt obligations, either Cedyna or JACCS would perform payments in
subrogation. In this analysis, recovery by means of payment in subrogation is not being
considered.
・ Of JACCS-guaranteed receivables, only 4 cases of default have occurred on the refinance
(Solutions) since the time of commencement of its handling in January 2010, and no
default has occurred at all on the Refinance (S Loan etc.) since the time of
commencement of its handling in November 2009. Therefore, conservatively, the value
of Solutions was applied to the refinance of Solutions, and the value of S Loan Plus was
applied to the Refinance (S Loan etc.).
・ Cedyna-guaranteed receivables account for 2/3 of the entire securitization pool. If the
receivables guaranteed by Cedyna and JACCS are combined and if the value of 1 is
assigned to the amount of newly originated receivables in one month, the amount of
newly originated receivables guaranteed by Cedyna has remained stably at roughly 2/3.
From the foregoing, it is assumed that the component ratio by guarantor in the
securitization pool after the Revolving Period of one year would not materially change
from what it is now.
・ Used car ratio is cited as an attribute that influences performance. At both
Cedyna-guaranteed receivables and JACCS-guaranteed receivables used car ratio has
remained stably in a range of 20% and 30%, and is assumed not to change materially in
the future.
・ From the foregoing, the standard scenario for the securitization pool of each loan type
after the Revolving Period is set by taking into account the component ratio (of 2:1) for
Cedyna-guaranteed receivables and JACCS-guaranteed receivables.
■Applied Value of Default Rate
（Annualized Value：%）
Cedyna-Guaranteed Receivables JACCS-Guaranteed Receivables Applied Value
Owner's Plan
0.5%
0.5%
0.5%
Twin Loan
1.0%
1.0%
1.0%
Refinance (Solutions)
0.4%
0.4%
Refinance (S Loan etc.)
0.3%
0.3%
Solutions
0.4%
0.3%
0.3%
S Loan
0.6%
0.5%
0.6%
S Loan Plus
0.6%
0.5%
0.5%
※Calculation：Lump-sum subrogation principal repayment / Outstanding as of end of previous month
（Comparison with Default Rate of Auto Loan Receivables Pools Monitored by R&I）
・ In order to confirm the level of performance of this instrument, R&I gathered
performances of the securitization transactions (531 pools) backed by auto loan
receivables which R&I assigns ratings to and monitors (“R&I Gathered Performances”),
and compared R&I Gathered Performances with VWFSJ’s historical data.
・ A review of dynamic data reveals that although there were times when default rate rose
slightly in the aftermaths of the Lehman Shock in and after 2008 and the Great Eastern
Japan Earthquake in March 2011, VWFSJ’s default rate has generally remained stably
at a level lower than that of R&I Gathered Performances.
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21
・ A comparison of static data on the receivables originated between 2007 and 2010 reveals
that VWFSJ ’ s default rates for Cedyna-guaranteed receivables and for
JACCS-guaranteed receivables remained at levels lower than the default rate for R&I
Gathered Performances.
・ A comparison of dynamic data and static data reveals that the performances of VWFSJ’
s auto loan receivables were better than those of auto loan receivables rated and
monitored by R&I.
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22
（Comparison of Dynamic Data）
Principal Outstanding
（Billion）
Default Rate
（Annual）
Dynamic Data
Principal Outstanding(R&I Gathered Performance ）
Principal Outstanding （JACCS-guaranteed receivables ）
Cedyna-Guaranteed Receivables_Default Rate
201203
201110
201105
201012
201007
201002
200909
200904
200811
200806
0.00%
200801
0
200708
0.50%
200703
200
200610
1.00%
200605
400
200512
1.50%
200507
600
200502
2.00%
200409
800
200404
2.50%
200311
1,000
200306
3.00%
200301
1,200
Principal Outstanding （Cedyna-guaranteed receivables ）
R&I Gathered Performance_Default Rate
JACCS-Guaranteed Receivables_Default Rate
[Data Source]
R&I Gathered Performance:from January 2003 to July 2012,Cedyna-guaranteed receivables:from January 2003 to July 2012,
JACCS-Guaranteed Receivables:from January 2007 to July 2012
（Comparison of Static Data）
Originated in year 2007
Originated in year 2008
Cumulative Gross Loss Ratio
Cumulative Gross Loss Ratio
3.00%
3.00%
2.50%
2.50%
2.00%
2.00%
1.50%
1.50%
1.00%
1.00%
0.50%
0.50%
0.00%
0.00%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
R&I Gathered Performance_Default Rate
JACCS-Guaranteed Receivables_Default Rate
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
(months elapsed)
Cedyna-Guaranteed Receivables_Default Rate
R&I Gathered Performance_Default Rate
JACCS-Guaranteed Receivables_Default Rate
(months elapsed)
Cedyna-Guaranteed Receivables_Default Rate
Data Source for all: 56 months elapsed
Data Source for all: 44 months elapsed
Originated in year 2009
Originated in year 2010
Cumulative Gross Loss Ratio
Cumulative Gross Loss Ratio
3.00%
3.00%
2.50%
2.50%
2.00%
2.00%
1.50%
1.50%
1.00%
1.00%
0.50%
0.50%
0.00%
0.00%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
R&I Gathered Performance_Default Rate
JACCS-Guaranteed Receivables_Default Rate
(months elapsed)
Cedyna-Guaranteed Receivables_Default Rate
R&I Gathered Performance_Default Rate
JACCS-Guaranteed Receivables_Default Rate
Data Source for all: 32 months elapsed
(months elapsed)
Cedyna-Guaranteed Receivables_Default Rate
Data Source for all: 20 months elapsed
Note：“R&I Gathered Performances” is based on the monitoring data gathered by R&I.
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23
Assumed scenario after the Revolving Period and Historical Data (Static Data)
Cumulative Gross Loss Ratio
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
51
53
55
57
59
(months elapsed)
weighted average of standard scenario
weighted average of stress multiple scenario
JACCS-Guaranteed Receivables originated from year 2007 to 2010
Level 1 Credit Enhancement Increase Condition
Cedyna-Guaranteed Receivables originated from year 2007 to 2010
・ The levels of standard scenario and stressed scenario that R&I set for this instrument’s
cash flow analysis are as shown above. A weighted average value is applied to the
standard scenario by taking into consideration the component ratio and average
remaining period for each loan type.
・ It is observed that the standard scenario for this instrument covers the historical data
(actual static data) on Cedyna-guaranteed receivables and JACCS-guaranteed
receivables that were originated between 2007 and 2010. If cumulative default rate
exceeds 1.60%, Level 2 Credit Enhancement Increase Condition will be hit and an early
redemption event will occur. (Refer to page 6 for Credit Enhancement Increase
Conditions.)
【Prepayment Ratio】
・ The applied value of prepayment ratio for each loan type is as provided below.
・ As in the case of default rate, the standard scenario for prepayment ratio for each loan type is
set by taking into consideration the component ratio (of 2:1) for Cedyna-guaranteed receivables
and JACCS-guaranteed receivables.
■Applied Value of Prepayment Ratio
（Annualized Value：%）
Cedyna-Guaranteed Receivables JACCS-Guaranteed Receivables Applied Value
Owner's Plan
11.0%
9.5%
10.5%
Twin Loan
13.3%
12.0%
12.9%
Refinance (Solutions)
12.9%
12.6%
8.6%
Refinance (S Loan etc.)
20.1%
19.5%
13.4%
Solutions
10.9%
7.5%
9.8%
S Loan
13.2%
10.4%
12.2%
S Loan Plus
22.0%
16.8%
20.3%
※Calculation：Lump-sum subrogation principal repayment / Outstanding as of end of previous month
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24
(２)
Establishment of Stress Multiple Scenario
【Stressed Scenario for Default Rate】
The number of receivables in the securitization pool of this instrument is 14,160 and average
balance of such receivables stands roughly at ¥2.14 million, representing a highly dispersed pool.
The largest receivable amount per obligor stands roughly at ¥13.52 million, which accounts for
0.045% of the securitization pool, bespeaking a low degree of concentration in a specific obligor.
Attribute distribution by geographic area is dispersed all over the country, suggesting a low degree
of geographical concentration. Moreover, name-based aggregation of an obligor is performed for
each sub-servicer. (i.e. if a same obligor is in both sub-servicer pool, the receivables for such obligor
is not aggregated.)
Under R&I’s rating approach, if the target rating is AAA in the case of a securitization
transaction backed by receivables from individual obligors such as auto loan receivables, a
multiplier factor of three is applied. For the purpose of this instrument, R&I has found it
unnecessary to give any additional stress in light of the facts that data correction for the reference
pool or securitization pool is unnecessary and that there was no excessive concentration of
attributes.
Rating Methodology of R&I
Target Rating
Personal receivables
AAA
3
AA
2.5
A
2
BBB
1.75
【Stressed Scenario for Prepayment Rate】
R&I adopted a stringent scenario by changing the stressed scenario from 0% to a maximum
stress value (standard scenario times 1.5).
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25
(３)
(a)
Cash Flow Test
About Receivables Pool that Change during the Revolving Period
【Restriction on Attributes of Receivables Pool】
・ For the purpose of this instrument, a Revolving Period of one year from the trust
commencement date is established.
・ As receivables in the pool change during the Revolving Period, there is a risk that the
attributes of the receivables in the underlying securitization pool may change. Change
in the attributes of the securitization pool is limited by establishing certain specific
restrictions on the changes in the attributes.
■The permissible concentration of the attributes
during the Revolving Period is as follows.(Table9)　Attribute
Permissible concentration
less than 5％
Non-VW Brands
less than 35％
Used vehicles
less than 40％
Balloon payment portion
【Assumed Component Ratio for Securitization Pool after the Revolving Period】
・ The component ratio by loan type as a percentage of newly created receivables as of
December 2012 (in terms of monetary amount) stood at 28.1% for Owner’s Plan, 35.8%
for Solutions and 28.9% for S Loan, and these three loan types combined accounted for
92.8% of the entire receivables, which did not represent a major change from the
component ratio observed a year earlier. These three loan types are assumed to account
for an overwhelming majority of the receivables created during the Revolving Period.
・ With respect to the loan contracts which are added during the Revolving Period, the
higher the percentage of incorporation of the loans with long remaining period is, the
larger the assumed cumulative amount of default would be. Therefore, out of the three
loan types which account for most of the remaining balance of receivables, it was
assumed, as a stringent scenario, that Owner’s Plan for which repayment is made 84
times would be added to the trust during the Revolving Period.
・ For the purpose of this instrument, R&I calculated the standard scenario using a
weighted average according to component ratios of the receivables assumed after the
Revolving Period and average remaining period for cash flows by loan type.
Loan agreement(Name)
Owner’s Plan
Twin Loan
Refinance (Solutions)
Refinance (S Loan etc.)
Solutions
S Loan
S Loan Plus
Assumed breakdown
of receivables after
the Revolving Period
Approx. 40％
Less than 1％
Less than 1％
Initial
percentage
25.87％
0.19％
1.28％
0.59％
39.87％
29.18％
3.02％
Less than 1％
Approx. 30％
Approx. 25％
Approx. 2％
Average time
remaining after the
Revolving Period
More than 2.5 years
More than 1.5 year
Less than 1 year
Less than 1 year
Less than 1.5 years
Less than 1.5 years
Less than 1 year
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26
(b)
Commingling Risk
For the purpose of cash flow analysis, R&I took advance payments into consideration and
confirmed that the principal of the instrument would be repaid in full and the interest would be
paid on a timely basis even if the Servicer or the Sub-Servicer goes bankrupt.
(c)
Payment Suspension Risk
For the purpose of cash flow analysis, R&I confirmed that the principal of the instrument would
be repaid in full and the interest would be paid on a timely basis even if a certain specific
percentage of obligors whose repayment method at the time of final repayment is determined as of
the time of VWFSJ’s bankruptcy declare suspension of payment.
(４)
Results
As a cash flow test, R&I performed a simulation by using a mixed scenario. As a result, through
analysis based on a worst-case scenario that took into account the timing for bankruptcy of the
Servicer or the Sub-Servicer, R&I confirmed that the principal of ABL (ABL 1) would be repaid in
full by the trust termination date of Trust 1 and interest would be paid on a timely basis. Therefore,
it can be said that with respect to the trust beneficial interest in Trust 2 and ABL (ABL 2), R&I
confirmed that the principal would be repaid in full and interest would be paid on a timely basis,
since such payments depend on the repaid principal amount of and interest on ABL (ABL 1) for
Trust 1.
４．
Comprehensive Evaluation
Thus, R&I confirmed that based on the results of cash flow risk analysis and of credit risk factor
analysis, there would be no problem in assigning a Long-term Issue Rating of AAA to the trust
beneficial interest in Trust 2 and ABL (ABL 2).
V INFORMATION CONCERNING LOSSES, CASH FLOW AND SENSITIVITY ANALYSIS
Credit enhancement
Liquidity enhancement
Overcollateralization, Advance Payment
Cash Reserve
Based on historical data of the Originator and the numerical values obtained from the cash flows
for this instrument, R&I assumes a cumulative default rate of approximately 1.1% as a standard
scenario concerning default. This rate is a level estimated by R&I based on the definitions of
default rate and other indicators for individual deals, and is not necessarily appropriate for, or
provided for the purpose of, direct comparisons with the default rate, delinquency rate or other
indicators.
The default rate stress scenario used when applying the following rating methodologies to the
assets of a Rated Entity to test whether R&I can assign a Rating of AAA is normally a level that is
three times the standard scenario. Under this default rate stress test, the Rated Entity for this
scheme can bear a stress level that is more than four times greater than the level assumed by R&I.
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27
VI RATING METHODOLOGY
The primary rating methodologies applied to those ratings are:
Announced in
TITLE
September 2010
Chapter 1: General
October 2010
Chapter 2: Particulars: Risks regarding structure
September 2010
Chapter 3: Particulars: Risks regarding underlying assets
Subchapter 1: Installment receivables (excluding revolving payment
receivables)
September 2010
Chapter 4: Particulars: Cash flow risk
Subchapter 1: Analysis method for monetary receivables, etc. (Large pool
approach)
Subchapter 6: Analysis method using cash flow test
The above rating methodologies are available at R&I's website:
http://www.r-i.co.jp/eng/sf/about/methodology/index.html
http://www.r-i.co.jp/jpn/sf/about/methodology/index.html
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28
"SF Credit Report," which describes the credit status of a structured finance product, is not the Credit
Rating Business, but one of the Ancillary Businesses (businesses excluding Credit Rating Service but
are ancillary to Credit Rating Activities) as set forth in Article 299, paragraph (1), item (xxviii)
of the Cabinet Office Ordinance on Financial Instruments Business, etc. With respect to such business,
relevant laws and regulations require measures to be implemented so that activities pertaining to such
business would not unreasonably affect the Credit Rating Activities, as well as measures to prevent
such business from being misperceived as the Credit Rating Business.
Unless specifically provided otherwise, all rights and interests (including copyrights, other
intellectual property rights, and know-how) regarding this report, the content of this report or any
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None of the information, etc. may be used, in whole or in part, (including without limitation
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discretion, to be reliable. However, R&I does not undertake any independent verification of the accuracy
or other aspects of that information. Therefore, R&I makes no representation or warranty, express or
implied, as to the accuracy, timeliness, adequacy, completeness, merchantability, fitness for any
particular purpose, or any other matter with respect to any such information. R&I is not responsible
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Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations
and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and
are not statements of fact. Further, R&I does not state its opinions about any risks other than credit
risk, give advice regarding investment decisions or financial matters, or endorse the merits of any
investment. R&I does not undertake any independent verification of the accuracy or other aspects of
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or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer.
For details, please refer to http://www.r-i.co.jp/eng/policy/policy.html.
Japanese is the official language of this material and if there are any inconsistencies or discrepancies
between the information written in Japanese and the information written in languages other than Japanese
the information written in Japanese will take precedence.
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29