Rating Action: Moody's affirms A1 (sf) rating of Mortgage Beneficial Interests A issued by Bora Chiara3
Global Credit Research - 25 Aug 2020
Approximately JPY17.5 billion in debt securities affected
Tokyo, August 25, 2020 -- Moody's SF Japan K.K. has affirmed the A1 (sf) rating of the Mortgage Beneficial Interests A issued by Bora Chiara3. The Mortgage Beneficial Interests are backed by residential mortgage loans insured by the Japan Housing Finance Agency (JHF).
The rating affirmation follows the additional entrustment of the residential mortgage loans and cash, and the increase in the principal of the Mortgage Beneficial Interests A.
The affected rating is as follows:
Mortgage Beneficial Interests A, Affirmed A1 (sf); previously on June 25, 2020 Affirmed A1 (sf)
Transaction Name: Bora Chiara3
Issue Amount: JPY 17,540,723,079
Scheduled Dividend Rate: Floating
Closing Date: November 25, 2019
Additional Entrustment Date: August 25, 2020
Final Maturity Date: November 26, 2057
Underlying Assets: Residential mortgage loan receivables insured by JHF
Housing Loan Insurance Underwriter: JHF
Arranger/Private Placement Dealer: Sumitomo Mitsui Trust Bank, Limited
Credit Enhancement and Liquidity: Cash Reserves (4.5% of outstanding pool balance) and excess spreads available
Moody's affirms the rating of the Mortgage Beneficial Interests A issued by Bora Chiara3 after the originator entrusted additional residential mortgage loan receivables and cash to the trust. The A1 (sf) rating on the Mortgage Beneficial Interests A is based on JHF's (A1, Issuer Rating, Stable) capability to pay principal insurance proceeds and the availability of cash reserve and excess spread to cover risks and expenses not covered by the insurance policy.
The underlying residential mortgage loan receivables are insured by housing loan insurance provided by JHF.
JHF's housing loan insurance covers principal losses on the residential mortgage loans in the pool. That is, JHF pays the insurance proceeds to the asset trustee in case of an insurable event, after receiving a valid insurance claim.
The cash reserve is used to cover various risks, including commingling risk, the shortfall in interest collections upon obligor default, and liquidity risk in the event of servicer default and replacement.
Moody's used mortgage pool default assumptions to assess the sufficiency of the coverage provided by cash reserve and excess spread. As such, neither detailed loan-by-loan Milan CE analysis nor cash flow model were used for the analysis.
The Mortgage Beneficial Interests A are redeemed according to the principal collections from the pool in a monthly, pass-through manner.
The scheduled dividend rate of the Mortgage Beneficial Interests A is equal to the base rate plus a spread. The spread is directly linked to the average prepayment rate from the closing date to the relevant calculation date. In its analysis, Moody's assessed the sufficiency of excess spread and cash reserve considering the highest possible spread.
The principal methodology used in this rating was "Moody's Approach to Rating RMBS Using the MILAN Framework" (Japanese) published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1228959. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the rating:
The primary factor that could lead to an upgrade of the rating is an upgrade of JHF's rating. The primary factor that could lead to a downgrade of the rating is a downgrade of JHF's rating.
Moody's did not use any models in its analysis and therefore did not conduct the sensitivity analysis.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Moody's did not use any models, or loss or cash flow analysis, in its analysis.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Moody's SF Japan K.K. is a registered credit rating agency under the Financial Instrument and Exchange Act but not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore the credit ratings assigned by Moody's SF Japan K.K. are Registered Credit Ratings to the FSA, but are not NRSRO Credit Ratings.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Yusuke Nakamura Analyst Structured Finance Group Moody's SF Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: 81 3 5408 4220 Client Service: 81 3 5408 4210 Marie Lam Associate Managing Director Structured Finance Group JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's SF Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: 81 3 5408 4220 Client Service: 81 3 5408 4210
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