Nomura International recently lead managed the fourth of its so-called "club funding" deals, which see a group of Japanese companies issuing private-placement bonds with the sole intention of pooling them into a securitization.

The Euroyen deal, via a Cayman Island-SPV called Ensemble IV, allows relatively small, lowly-rated or unrated companies to use the club funding strategy to access funds at rates lower than that available from banks.

According to Japan Rating & Investment, which has rated the deal, more than half of the 29 companies involved (from 16 industries) have no credit rating and of the ones that have only one has a rating as high as single-A. Those that have accessed the corporate bond markets in the past have done so rarely as the Japanese market is unreceptive to low investment grade credits or companies with a below investment grade ratings.

The deal totals 95.5 billion ($879 million) and was split into four tranches.

The senior tranche was worth 67.5 billion, had a coupon of 0.94% and ratings of AAA; the senior mezzanine notes were worth 6.5 billion, had a coupon of 1.02% and ratings of A; the mezzanine notes were worth 3.5 billion, had a coupon of 1.52% and ratings of BBB; and the junior mezzanine notes were worth 1 billion, had a coupon of 2% and ratings of BBB-minus. There were also 17 billion worth of first loss, unrated notes, which pay a 5% coupon. All the notes will be redeemed in April 2003.

Nomura Securities sold the bonds and, according to an official at the firm, demand was good as the pricing compares favorably to straight bonds and even other securitizations with similar ratings.

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