Late-July and early-August was a busy time in Japan's domestic securitization market, as originators positioned themselves for the fiscal half year-end in September, and investors digested deals backed by a variety of assets without showing much sign of being sated.
Japanese securitization pros said that some investors were slightly nervous thanks to the prospect of the Bank of Japan's ending its zero interest policy, but that this was not enough to stop them buying. Nervous or not, pros pointed out, investors have few alternatives if they need to buy highly rated assets. Also, asset backeds have more pulling power than straight bonds when investors are also worrying about corporate credit quality in light of Seiyo Corp.'s filing for liquidation.
Sumisho Lease Co.'s 35 billion lease-backed ABS stood out, if for no other reason than it was split into an unheard of (at least in Asia) 59 tranches, with staggered bullet maturities and coupon payments.
All the tranches were rated at triple-A by Standard & Poor's and Moody's Investors Service and have 2007 final maturities. Coupon payments varied from 0.173% to 1.261%. The notes are structured using senior and subordinated trust certificates (with Norinchukin Trust & Banking as trustee), with the retained and unrated subordinated certificates worth 4.1 billion acting as credit enhancement.
Further credit enhancement comes from a fully funded reserve account equal to around five months' cashflow.
The 6,534 leases (worth 42 billion) themselves were cherry-picked from Sumisho's general portfolio to exclude leases to small businesses and to weight the pot towards top-tier obligors, according to Moody's.
Sumisho is an affiliate of Sumitomo Corp. and is one of Japan's largest equipment lease firms. The deal is called Sumisho Lease Receivables Co. Lease Receivables Trust Series One.
Century Leasing System also closed a lease-backed deal, in its case a transaction worth 20.6 billion and chopped into 10 tranches. The eight senior pieces have Aaa ratings from Moody's and two mezzanine chunks are rated at A2. All the tranches have 2005 final maturities and coupons range from 0.29% to 1.38%. Credit enhancement for the deal - called Century Broadway Funding SPC - comes from the senior/subordinated structure and a cash reserve of 200 million.
Other lease-backeds include a 31 billion deal, backed by small ticket leases, from Credit Saison, a credit card and consumer finance operation. This trust certificate deal also used a senior/subordinated structure, with nine tranches rated at Aaa and one (worth 2.5 billion) at A2. All the tranches have 2007 maturities, with bullet redemptions varying from October this year to 2002. The notes feature coupons from 0.19% to 1.19%.
The mezzanine tranche is retained, while the senior tranches have been sold via Fuji Securities.
At least one CMBS was completed during the same period, a 10.1 Euroyen billion private placement for Daiei Inc. The deal is backed by a non-recourse loan, which is in turn backed by a store owned by the company in Himonya. It came via a Cayman Islands SPC called Meguro Property Finance Corp. and was split into five tranches.
BNP Paribas' Tokyo branch arranged the transaction and acts as the loan administrator. A Paribas official said that all the paper had been sold.
The A tranche was worth 6.6 billion and rated at A2 by Moody's and the B tranche was worth 1.1 billion and rated Baa2. The three remaining tranches were unrated.