Japan's domestic asset-backed market was busy in recent weeks, though not as busy as investors desperate for investment opportunities would have liked.

"Japanese investors are very hungry for ABS for the time being, but there is not enough in the market. Even straight bonds are very scarce," commented one structured finance banker in Tokyo. Strong Japanese investor demand for yen-denominated assets is one reason why a number of repeat ABS issuers are turning to domestic investors rather than the Euromarket, he added.

In one innovative transaction, Tokio Marine & Fire Insurance Co. and Sakura Securities co-managed the first Japanese ABS deal to be arranged and guaranteed by a non-life insurance company. The 40 billion ($327 million), four-year securities issued by ML Securities were backed by leases originated by Mitsui Leasing and Development. The transaction, whose principal and interest payments are guaranteed by Tokio Marine & Fire, was unrated and placed entirely with Shizuoka Bank.

"We did this transaction at the request of the investor, who asked us to arrange a wrapped bond [issue] to fit their investment standard. So we shopped in the market to find an appropriate issuer, and met the needs of both the issuer and the investor," explained Yoshitaka Takahashi, manager of investment and structured finance at Tokio Marine & Fire. The firm will pitch for more transactions in which it can serve as both arranger and guarantor, but Japanese regulations mean that insurance companies can only underwrite private placements, he added.

A second domestic securitization with a striking look was Japan General Finance's 20 billion kimono loan-backed securitization, arranged by Daiwa SB Capital Markets. An SPC called Spring Funding Limited issued eight tranches of bullet securities, with coupons ranging from 0.37% to 1.53% and maturities from 6 months to 5 years. The issue was rated triple-A by Moody's Investors Service and Japan R&I. In February the seller issued an auto-loan backed deal in the Euromarket, but domestic investors' familiarity with the asset and a lack of paper in the domestic market made it more advantageous to issue at home, commented a Daiwa banker.

Finally, leading real estate developer Tokyo Tatemono priced its first CMBS, the first securitization of real estate using Japan's SPC law that was passed last September. Three classes of five-year notes were issued by Takanawa Apartment Inc: 500 million priced at 1.75%, 2 billion priced at 2.74%, and 500 million priced at 3.69%. Standard & Poor's rated the first two classes single-A and the third class triple-B. The deal, backed by rents from a luxury serviced apartment building in Tokyo, was arranged by Fuji Bank and privately placed, said Fumio Inada, Tokyo Tatemono's group leader of investment services. VC

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