A CBO backed by loans made to 1,671 small and medium sized enterprises in Tokyo was closed at the end of March, in a deal worth 67.99 billion ($647 million) and rated AA-plus by Japan Rating & Investment.

The deal, called Prestar Asset Funding, was arranged by Fuji Securities and pricing was set at 1.13% for the April 2003 bullet-type notes.

The loans were made Tokyo Tomin Bank, Bank of Yokohama and the Industrial Bank of Japan and were guaranteed by the local government's credit guarantee corporation.

The deal is part of an effort by the Tokyo government to provide funding for SMEs in the city, a group of companies that are currently experiencing a credit crunch, as their traditional bank funding has become scarce. Market pros said that, while the central government has pumped funds into the big banks and national companies, little of that money has trickled down to the smaller concerns and the Tokyo government has not been able to provide similar funding, as it itself is suffering because of a plunge in fiscal revenues.

This transaction is one attempt to deal with that problem and is particularly associated with Tokyo's controversial and outspoken governor, Shintaro Ishihara, who has personally championed the deal as a way to fund SMEs and, in the longer term, to develop a local bond market.

The deal may be the first of many, Ishihara told reporters, and future deals may be attempted without the guarantee.

Other unusual transactions that hit the market included an unrated deal from Sumitomo Corp., which parceled shipping loans, collateralized by 33 ships. The deal, the first shipping-backed transaction in Japan, was privately placed and details were scarce. It was arranged by the Industrial Bank of Japan and worth 90 billion.

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