June 10, 2014 / 6:02 AM / 4 years ago

Fitch Affirms HYDRA Funding Corp's Bonds

(The following statement was released by the rating agency) TOKYO, June 10 (Fitch) Fitch Ratings-Tokyo- 10 June 2014: Fitch Ratings has affirmed HYDRA Funding Corporation's series 1 bonds. The transaction is a securitisation of residential mortgage loans, including non-performing loans, originated by multiple originators in Japan. The rating actions are listed below. JPY5.17bn* Class S1 bonds affirmed at 'AAAsf'; Outlook Stable JPY0.47bn* Class S4 bonds affirmed at 'AAAsf'; Outlook Stable JPY0.25bn* Class J bonds affirmed at 'AAsf'; Outlook Stable *as of 9 June 2014 KEY RATING DRIVERS The affirmations reflect Fitch's view that current available credit enhancement (CE) levels are sufficient to support the ratings and the agency's expectations of Japanese economic conditions that affect the borrowers' ability to pay the residential mortgage loans. As principal redemption has progressed, the total bond balance has become smaller than the balance of the senior beneficial interests (BIs) backed by residential mortgage loans originated by the former Nippon Home Finance Co., Ltd. (NHF), the largest underlying asset for this transaction. The NHF pool performance has remained within Fitch's expectations and the CE levels of the underlying senior BIs have significantly increased to date. In addition, Fitch believes that the cash reserves in Hydra trust and NHF trust provide sufficient liquidity protection to support the current ratings. RATING SENSITIVITIES An unexpected increase in the delinquency or default rate in the underlying pools may lead to higher loss assumption which may, in turn, affect the ratings of the bonds. Fitch believes that the class J bonds would not be supported at a higher rating level considering the overall transaction structure, including the waterfall structure and the account bank trigger in the underlying trusts. Therefore, the ratings of the class J bonds are unlikely to be upgraded in the foreseeable future. The originators of the underlying residential mortgage loans are Star Capital (formerly NHF), SBI Mortgage Co., Ltd. (formerly GOODLOAN Co., Ltd. ), Manulife Life Insurance Company (formerly Daihyaku Mutual Life Insurance Company) and Joint Residential Fudosan Co., Ltd. (formerly L Kakuei Corporation). Contacts: Lead Surveillance Analyst Naoki Saito Director +81 3 3288 2631 Fitch Ratings Japan Limited Kojimachi Crystal City East Wing 3rd Floor 4-8 Kojimachi, Chiyoda-ku Tokyo 102-0083 Committee Chairperson Atsushi Kuroda Senior Director +81 3 3288 2692 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. The source of information used to assess these ratings was Shinsei Trust & Banking Co., Ltd. as trustee and calculation agent. Applicable criteria, 'Global Structured Finance Rating Criteria', dated 20 May 2014; 'APAC Residential Mortgage Criteria - Amended' dated 1 August 2013; 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds', dated 23 January 2014; 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions', dated 28 May 2014; and 'Counterparty Criteria for Structured Finance and Covered Bonds', dated 14 May 2014; are available at www.fitchratings.com. Applicable Criteria and Related Research: APAC Residential Mortgage Criteria - Amended here Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds here Global Structured Finance Rating Criteria here Criteria for Rating Caps and Limitations in Global Structured Finance Transactions here Counterparty Criteria for Structured Finance and Covered Bonds here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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