A review for possible downgrade of the government of Japan's domestic currency rating by Moody's Investors Service decision will not affect any domestic or cross-border asset-backed transactions, except for two outstanding transactions with direct ties to the Japanese government.

Moody's placed under review for possible downgrade the Aaa rating of 66.6 billion ($600 million) of notes issued by Kris (Cayman Islands) One Ltd. due in 2004, and the Aa1 rating of 10 billion of notes issued by Delphinium Funding Corp. due in 2004.

The action stems from the agency's review for possible downgrade the Aa1-rated, yen-denominated domestic securities issued or guaranteed by the Japanese government due to concerns over rising public debt. Both transactions have exposure to the credit risk of the Japanese government's yen obligations, explained the agency.

However, all other Japanese ABS transactions are unaffected. "We have a concept called the local currency guideline, which indicates how high a rating one may achieve in domestic issuance," said Frederic Drevon, managing director of at Moody's in Hong Kong. "All other Japanese ABS transactions excepting those two do not have any credit risk which is related to Japanese government risk. So there's no restriction on the ability to reach triple-A ratings."

The agency maintains an Aaa local currency guideline for non-governmental issuers in Japan.

The Kris transaction involved the securitization of a loan to the government of Malaysia originated by Sumitomo Bank and backed by trade insurance from Japan's Ministry of Trade and Industry. It was arranged by Nomura Securities Co. at the end of December 1998.

The Delphinium transaction, which closed in early 1999, was a sale-lease back deal by Daichi Mutual Life Insurance, backed by commercial real estate and Japanese government bonds.

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