There was plenty of ABS activity in Japan last week. One of the more interesting transactions launched was a massive 120 billion ($1.1 billion) synthetic CLO issued by Sumitomo Mitsui Banking Corp.

The credit-linked notes - issued out of the Proton Three vehicle - are referenced to a 1 trillion portfolio of loans originated by Sumitomo to small and medium-sized enterprises. While the rest of Asian banks arelagging in terms of synthetic balance sheet management, their Japanese counterparts are setting the standard.

Sumitomo's CLO, arranged by Daiwa Securities, aims to create a structure which will reduce its credit risk under the new BIS capital standards, although the exact level of credit relief is not clear at this point.

The transaction, which has a legal final of 2.5 years, is split into three tranches. Moody's Investor's Service has rated the 80 billion class A triple-A, while the 20 billion B notes and 20 billion C tranche are rated A2' and Baa3' respectively.

One of Japan's biggest consumer credit companies and regular issuers, Orient Corp., is tapping the market again, this time with an 11.4 billion deal backed by installment sales receivables.

BNP Paribas Securities is handling the private placement, the third offering in 2005 from the Lumiere Shopping Credit Receivables Trust. Moody's has assigned triple-A ratings to the five-year, fixed-rate notes.

Meanwhile, the Japanese supermarket group, Ito-Yokado Co., will use securitization to fund its diversification into the shopping mall business. With profits down, Ito-Yokado is teaming up with Mitsui Co. to develop and operate shopping centers.

Ito-Yokado has put up 60% and Mitsui 40% of the 150 million needed to capitalize the business, but the bulk of the funds needed to finance construction of the upscale malls will come from ABS offerings. The first development will open at the end of April in Chiba Prefecture, with additional centers due to open in 2005 in Saitama Prefecture, Tokyo and Sapporo.

In other parts of the region, and as ASR went to press, Korea First Bank was set to price its 500 million ($671.1 million) fourth cross-border MBS via Calyon, Royal Bank of Scotland and Standard Chartered. During pre-marketing, rumors suggested the leads had offered to hard underwrite the deal at 14 basis points, with actual pricing expected to be a few basis points inside that.

However, the General Motors Corp. corporate downgrade (see ASR 3/21/05) caused some to speculate that high-grade ABS spreads in all regions might experience slight widening. Rival bankers reported that even though Korea First's offering is wrapped, investors might look more at the underlying and final pricing might end up around 13 to 14 basis points. Bankers at the leads did not respond to the speculation, maintaining that demand from European investors remains high.

Elsewhere, bids were due in last Wednesday for the first THB1.8 billion deal from the Government of Thailand's proposed THB24 billion ($626 million) ABS program (see ASR 3/14/05). According to sources, several foreign firms were invited to pitch. Proceeds from the scheme will fund the construction of a massive government office development.

Copyright 2005 Thomson Media Inc. All Rights Reserved.

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