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December 21, 2007 |
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SANWA FINANCE: S&P Cuts Rating on Pylos II Notes to 'BB+' Standard & Poor's Ratings Services lowered its rating on the notes issued under the Pylos Ltd. transaction to 'BBB-' from 'A', and its rating on the notes issued under the Pylos II Ltd. transaction to 'BB+' from 'A'. The ratings remain on CreditWatch with negative implications, where they were placed on March 15, 2007. The CreditWatch listings on March 15, 2007, reflected Standard & Poor's heightened expectations of a negative impact from weaker performance in the underlying asset pools. Standard & Poor's examined the transactions through meetings with the relevant parties and by collecting additional information, seeking to identify the reasons behind the recent deterioration in performance and to formulate an appropriate outlook. On Sept. 21, 2007, Standard & Poor's decided to keep the ratings on CreditWatch because it was unable to obtain a portion of information relating to the securitized pool; some of the reports submitted for monitoring purposes lacked this information. The reports have now been amended as necessary following discussions among the relevant parties. The downgrades reflect the negative impact of weakening performance in the underlying asset pools. The transactions have hit various triggers, which have been waived based on an agreement among the relevant parties. In addition, the relevant parties agreed to amend the redemption schedules in July 2007. Although transaction repayments are being made according to the revised schedule, the negative impact from weaker performance in the underlying asset pools, such as an increase in default ratios and a decrease in principal repayment ratios, more than offsets the benefits attained from an increased in the percentage of credit support due to redemption. Pylos Ltd. is subject to a smaller downgrade than Pylos II Ltd., reflecting a rise in credit support for this transaction following the partial repayment of principal through the additional entrustment of cash. Given that the performance of the two transactions continues to weaken, the ratings remain on CreditWatch with negative implications. Standard & Poor's will reconsider and resolve the CreditWatch listings after confirming the transactions' performance prospects. The notes issued under the transactions are ultimately backed by pools of unsecured consumer loan receivables originated by Sanwa Finance Co. Ltd. |
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