[non-NRSRO] Auto Loan ABS Program 2104 Series — Moody’s assigns provisional

Rating Action: Moody’s assigns provisional rating to Auto Loan ABS Program 2104 SeriesGlobal Credit Research – 05 Apr 2021JPY807 million in debt securities affectedTokyo, April 05, 2021 — Moody’s SF Japan K.K. has assigned a provisional rating to Auto Loan ABS Program 2104 Series. This transaction is backed by auto loan receivables.The complete rating action is as follows:Transaction Name: Auto Loan ABS Program 2104 SeriesClass: ABLRating: (P)Aaa (sf)Issue Amount: JPY807 millionInterest Rate: FixedClosing Date: April 13, 2021Final Maturity Date: June 18, 2027Underlying Asset: Auto loan receivablesTotal Amount of Receivables: JPY996,660,953 (JPY974,507,073 in principal)Loan Fund Trustee/Money Fund Trustee: Mizuho Trust & Banking Co., Ltd. (“Mizuho Trust”) Arranger: Mizuho Trust RATINGS RATIONALE The Loan Fund Trustee enters the affiliated auto loan program agreement with the affiliated financial institution, acting as originator and initial servicer. The affiliated auto loans are guaranteed by the affiliated financial institution.The Loan Fund Trustee extends the affiliated loan to obligors based on the affiliated auto loan agreement.The originator entrusts cash to the Money Fund Trustee to enhance the credit and the liquidity of the Auto Loan Fund, and receives the Money Fund Beneficial Interest.The Money Fund Trustee entrusts the cash, in an amount equal to the Money Fund Beneficial Interest, to the Loan Fund Trustee, and receives the Class 2 Beneficial Interest.The originator entrusts cash to the Loan Fund Trustee and receives the Class 1 Beneficial Interest. The Loan Fund Trustee receives a limited recourse loan (the ABL) from the ABL investor, and redeems the Class 1 Beneficial Interest in full.Credit enhancement is provided by the senior/subordinated structure and available excess spread. Subordination (excluding liquidity reserves) comprises approximately 20.9% of the total outstanding amount of the ABL and the Class 2 Beneficial Interest.The ABL is redeemed on a monthly pass-through basis. The Class 2 Beneficial Interest is partly redeemed to the extent that the required enhancement is maintained.If any early amortization events occur, the dividend waterfall to the Class 2 Beneficial Interest is suspended, and excess spread is used to redeem the ABL of this series (Auto Loan ABS Program 2104 Series). Auto loans’ interest and principal collected from Auto Loan ABS program series which have their ABLs already fully redeemed will be distributed to the outstanding ABLs from other Auto Loan ABS program series. This cross collateralization mechanism is implemented via the Money Fund, which is held by the Money Fund Trustee.Early amortization events include a servicer replacement event occurring, such as the occurrence of an uncured principal deficiency ledger (PDL) or the bankruptcy of the affiliated financial institution.If any servicer replacement events occur, the 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 several months of interest payments on the ABL, as well as fees relating to initial and ongoing back-up servicer operations.Commingling risk is covered in full by the Class 2 Beneficial Interest.The rating is based mainly on the credit quality of the receivables, the transaction structure, and the servicer’s experience.Moody’s estimated the annualized expected default rate of the underlying assets at 2.5% (cumulative expected default rate: approximately 4.9%, Aaa credit enhancement: approximately 14.4%), after taking into consideration receivable attributes, historical data on the originator’s entire pool, performance data on existing securitization pools, and industry trends. The expected default rate is based on the default definition used in Moody’s analysis and may not be comparable…