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Cautiously, Mizuho Bank wades deeper into ABCP waters

Working Capital Management Co., a fully supported asset-backed commercial paper conduit sponsored by Mizuho Corporate Bank, raised its purchase limit to $5 billion, from $3 billion. While it is not expected to substantially impact the ABCP sector, market sources familiar with the situation say that it represents the bank's more aggressive, albeit measured, commitment to acquiring for its securitization platform.

Mizuho Corporate Bank, the corporate banking arm of Mizuho Financial Corp., was created in April 2002 after Dai-Ichi Kangyo Bank and Fuji Bank's corporate banking divisions were consolidated to the Industrial Bank of Japan. The new entity inherited a substantial amount of non-performing loan assets from its predecessors, a carry over from the days of permissive lending practices across the Japanese banking industry in the 1990s. During the first few years of its life, however, Mizuho steadily whittled away at its non-performing loans (NPL), reducing holdings to about 1.4% by the end of March 2006, according to press reports.

"They have a very limited amount of NPLs right now," said a source familiar with the bank. "The bank itself is more aggressive than before; they are going to be more properly aggressive."

Mizuho Corporate Bank's conduit business played a significant role in the bank's positive turnaround, and that dynamic will continue, said market sources. Last year, the bank increased its conduit asset balances by $1 billion, up from a few hundred million. It added three experienced staff members to its U.S. origination team. In the future, it plans to increase its conduit assets by $1.5 billion by focusing on acquiring relatively traditional assets, said a market source.

The bank hopes to implement several strategies to ensure the growth of its securitization platform, including diversifying its asset portfolio and beefing up its origination staff with more hires. Working Capital Management, handled out of New York City, has assets including credit card receivables, dealer floorplan loans, leases and trade receivables. That conduit has pipeline deals totaling between $1.5 billion and $2 billion, although it has about $3 billion in total purchase commitments. The bank sponsors another conduit, Advantage Asset Securitization, which sometimes manages its riskier exposure, said a market source.

Going ahead, Mizuho Corporate Bank will focus increasingly on winning international business, particularly from U.S. clients, said a source.

"They successfully came back and are now more confident in [their] future, continuous growth," said a market source.

Moody's Investors Service rates the fully supported conduit a P-1, owing to about $157 million in program-level credit enhancement and a liquidity facility provided by the bank.

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