Japan's asset-backed market kept busy in recent weeks, thanks to a steady stream of auto loan- and lease-backed issues from both first-time and repeat ABS originators.
A growing pool of ABS investors, combined with a limited supply of corporate bond issues, have made conditions ideal for issuance in the domestic market. "There is a slight Japan risk premium in the Euromarket, and straight bond issuance has been slow in Japan since April, so domestic investors are showing much demand for yen-denominated paper," commented a structured finance banker in Tokyo.
Japanese investors are also becoming more savvy when it comes to analyzing asset-backed deals, noted another banker. "The investor base is becoming more sophisticated. Before, certain names in Japan did not trade as well, but investors are increasingly realizing they are financing assets, not a company," he said.
The biggest deal in the past two weeks came from equipment leasing company Tokyo Leasing. An SPC called TLC Finance Co. issued 38 billion ($364 million) of bonds backed by equipment leases.
The bonds were chopped up into 12 tranches with coupons ranging from 0.14% to 1.61% and maturities ranging from three months to three years. DKB Securities arranged the transaction, which was rated triple-A by Moody's.
Auto loans showed up in two other deals, both originated by the captive financing companies of automobile makers Mitsubishi Motors and Nissan Motor Co.
Mitsubishi Auto Credit-Lease Corp. raised 26.7 billion of auto loan-backed bonds issued by MCL Japan Funding, in its first asset-backed issue in the domestic market. That issue comprised 11 classes of bullet securities priced from 0.27% to 1.10%, with maturities ranging from three months to 2.5 years, plus a pass-through tranche with a five-year legal maturity. IBJ Securities arranged the transaction, which was rated triple-A by Standard & Poor's.
Not to be outdone, Nissan Credit Corp. issued 20.08 billion-worth of notes via Libra Funding Corporation I, its third securitization of auto loans in the Euromarket. The 1.48-year average life securities were priced at 26 basis points over one-month Libor and were rated triple-A by Moody's. Nikko Salomon Smith Barney was lead manager.
Loans continue to be a popular asset class in Japan, evidenced by a 9.1 billion consumer loan-backed transaction for personal finance company Hitachi Shinpan. The four-year notes, issued by Hero Limited, bear an annual fixed coupon of 2.5% and were rated Aa3 by Moody's. The issue was arranged by Lehman Brothers and domestically placed.
Last and least in size was a $25.6 million, small business loan-backed securitization originated by Shinki Co. and arranged by ING Barings. That issue by Future Capital Limited comprised 3.5-year average life notes priced at 55 basis points over three-month Libor. It was rated triple-A by Moody's and Standard & Poor's based on a wrap by Financial Security Assurance.