Japan-based supermarket operator Mycal Corp. filed for bankruptcy and made history this month when it failed to make the payments on its Multiple Asset Funding ABS transaction, issued in 1997, marking the first Japanese ABS default ever.

In a report last week, Merrill Lynch said the default has caused investors to pay closer attention to the links between originator credit and asset-backed securities. In the Mycal deal, as well as in several others, the ABS is credit-linked, which means it ultimately relies on the credit quality of the originator. However, the report indicated that previous research conducted demonstrated that in the case of Mycal transactions, most ABS investors were seemingly aware of the links between the originator credit and the ABS deal. The company's research has also indicated there were no reactions at hand in the ABS spreads.

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