Japanese consumer finance company Sanwa has priced and closed its inaugural asset-backed security issue, but only after dropping an intended Euro tranche and postponing the deal's closing for one to two weeks.

"The main challenge was the reaction of some investors to a Japanese risk," explains Iain Barbour at Commerzbank in London. "There were a core group of investors who did not want Japanese risk. But their issue is with the current economic situation in Japan, rather than with Japanese consumer finance assets, or Japanese structured issues."

He continues, "The investors who did buy the deal came from across Europe and Asia and bought it because the structure's ability to mitigate risk settled their concerns, and the deal offered excellent relative value. Sanwa is also the largest of the privately owned consumer finance companies, and this helped reassure investors."

The deal now involves a $130 million tranche, and a 2.5 billion ($19.5 million) tranche. Both were priced at one month Libor plus 110 basis points, and have a weighted average life of 4.77 years. The deal priced wider than the recent Clare I and Clare II deals, which were also cross-border Japanese transactions. But the Clare deals had shorter average lives - Clare II had an average life of 1.75 years.

"We changed the currency denominations on the tranches because of investor demand," said Barbour. "The largest part of the issue went into the European conduit market where the investors wanted dollars."

Barbour expects to continue doing cross-border deals from Japan. "I would expect that we will concentrate on cross-border deals," he said, adding that the apprehension about Japanese credits among some European investors would not impede the future growth of cross-border Japanese issuance, which to date only has small volumes. "Though some investors are uncertain, there is a larger group of investors looking at Japan who are prepared to buy a well structured deal that provides good value," he said.

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