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December 12, 2007 |
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CBO ALL JAPAN: S&P Puts Class B, C and D Notes on CreditWatch Standard & Poor's Ratings Services said that its ratings on the class B, C, and D series one notes issued under the CBO All Japan Tokutei Mokuteki Kaisha transaction will remain on CreditWatch, where they were placed with negative implications on Aug. 28, 2007. At the same time, Standard & Poor's affirmed its 'AAA' rating on the class A notes. After the ratings on the class B, C, and D notes were lowered and kept on CreditWatch with negative implications on Sept. 11, 2007, the default rates for the underlying asset pool, comprising bonds issued by Japanese small and midsize enterprises, remained at high levels while administrative agent Mizuho Bank implemented measures for stricter management of the SME bonds. The ratings remain on CreditWatch in light of Standard & Poor's view that it will take a few more months to judge the degree of positive impact that Mizuho's tightened administration measures may have on the transaction. The accumulated default amount of the underlying assets over the 20 months between closing and the end of November 2007 was JPY3.9 billion (4.27% of the initial balance). The monthly default amount of the underlying asset pool remained high after March 2007 but has trended downward in November to around JPY200 million, after peaking at JPY600 million in September. However, the distribution of the estimated annual default probability derived using the Chusho Kigyo (SME) Credit Model is migrating negatively, and the weighted average default probability has increased to about 0.9% (having stood at about 0.5% as of the launch of the transaction). Mizuho Bank has also formulated a program to reinforce its bond administration system, initiating efforts to bolster its debt protection and collection policies. Mizuho is pursuing thorough oversight of each obligor's cash management to cope with risks associated with bullet repayment of the bonds. Standard & Poor's believes risk factors related to this transaction will likely be mitigated to a certain extent by these measures enforced by Mizuho Bank. Standard & Poor's plans to resolve the CreditWatch listings or revise the ratings upon reviewing the default amount of the underlying asset pool, as well as the overall performance of the transaction including collection amounts from the defaulted bonds, over the next few months. Ratings Still on CreditWatch JPY88.1 billion fixed-rate series one notes Class Rating Issue amount Final maturity date Class B BB+/Watch Neg JPY83.1 bil. July 2009 Class C B+/Watch Neg JPY0.7 bil. July 2009 Class D B/Watch Neg JPY0.3 bil. July 2009 Rating Affirmed Class Rating Issue amount Final maturity date Class A AAA JPY4.0 bil. April 2009 |
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