Japan's most prolific securitizer, Orient Corp. (Orico), recently issued what is thought to be the first domestically placed residential MBS in Japan, in a private deal arranged by DKB Securities, sources in Tokyo said.

The blaze of publicity that would normally accompany such a milestone was absent as the private nature of the deal meant that DKB was unable to comment officially on the deal, beyond confirming that it had taken place, and Orico was also staying tight-lipped.

However, it was possible to confirm that the transaction was worth 73 billion ($685 million) in total and was split into a senior tranche worth 65 billion and a retained, junior piece worth 8 billion. The pass-through notes pay an interest of about 2.9%, with a maturity of about nine years.

Orico is a top-tier consumer finance company known for its consumer asset-backed deals. Unusually for such companies it is rated, but as its rating is relatively low it can best access funds at competitive rates through securitizing its assets, ABS experts in Tokyo said.

One possible reason for the originator and the underwriter remaining tight-lipped is suggestions that the transaction was not the conspicuous success that they would have hoped for. Indeed, sources close to the deal in Tokyo, said that the underwriters had found it hard to place the paper, as investors were made nervous by the lack of a rating, the trust-based structure and the fact that Orico is financially relatively weak, at least compared to the big banks.

Japan's first successful residential MBS was launched last year by Bear Stearns on behalf of Sanwa Bank, but other issues have been slow in coming because, not only are the banks no longer as desperate for cash as they once were, there are also still legal problems surrounding the transfer of mortgages into SPCs.

According to market pros in Tokyo, while Bear Stearns seems to have solved them with the help of, among others, law firm Orrick Herrington & Sutcliffe, they are keeping that information to themselves.

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