OSCAR US 2023-1 is backed by a pool of Japanese Yen auto loan receivables originated by Orient Corp. (Orico), an affiliate of Mizuho Bank. The deal will be the 15th securitization transaction using the OSCAR name to be placed in the U.S. market, according to Moody's Investor Service.
OSCAR US Funding XV LLC is issuing three classes of notes totaling $251.6 million for OSCAR US 2023-1 with final maturities ranging from 2024 to 2027. The US dollar-denominated class A-1, A-2 and A-3 notes will be backed by senior series auto loans and pay fixed interest. To hedge the ensuing foreign exchange risk, Mizuho Securities provides currency swap to the issuer, according to Moody's.
Another three notes, A5 senior BIs, a class M loan and subordinated Bis, are denominated in Yen.
The seller, Orico, is both originator and initial servicer. The trustee is Mizuho Trust & Banking, the back-up servicer is MU Frontier Servicer Co, and the lead underwriters are Mizuho Securities USA and BNP Paribas, which will also be initial note purchasers.
The pool of eligible receivables comprises 38,379 loans with a weighted-average interest rate of 5.6%, weighted-average initial term of 66 months, and weighted-average remaining term of 59 months.
The total loan balance is JPY 49.2 billion ($350 million) with an average loan balance of JPY 1.28 million ($9,112). Loans are only provided to borrowers resident in Japan.
OSCAR US 2023-1's transaction structure is the same as that of OSCAR US 2022-1 (
Fitch Ratings has a deteriorating sector outlook for Japanese auto loan ABS transactions, although it forecasts the rise in default rates to be limited due to strong labor market conditions. It expects asset performance to be pressured due to inflation exceeding nominal wage growth, which will reduce borrowers' debt-servicing ability, and assumes a base-case cumulative default rate of 1.55% for OSCAR US 2023-1.
However, the transaction incorporates sufficient credit enhancement provided by subordination and excess spread so that all rated note classes can withstand Fitch's AAA stress scenario, the ratings agency says.
Orico is a major Japanese finance company with extensive experience in securitizations, says Moody's. It has securitized various types of assets, including auto loan receivables, installment sales receivables and credit card receivables, since 1996. Its interests are well aligned with those of investors because it retains significant first-loss and mezzanine portions.
Moody's has provisionally assigned P-1 to the class A-1 notes and Aaa to the class A-2 and Class A-3 notes, all of which are denominated in US dollars, and A1 to the Yen-denominated class M loan. Fitch has provisionally assigned F1+ to the class A-1 notes and AAA to the class A-2 and A-3 notes. The closing date for the US dollar notes is July 31.
