There has been plenty of prep work for Asian deals likely to launch at the start of 2006. Most activity will come from Japan, with at least three transactions in the pipeline.

Pachinko pinball parlor operator Daiei Co. is lining up a Y25 billion transaction backed by cash flows from its business. In exchange for a loan from Shinsei Bank, Daiei will sell ownership rights of income from its 17 highest-earning parlors.

The transaction will likely receive single-A ratings from agencies, one notch above the borrower's stand-alone rating. If successful, Shinsei could look to raise Y100 billion from other pachinko operators in the next year.

Based in Fukushima Prefecture, Daiei runs one of the country's largest pachinko franchises with 35 branches. Pachinko is one of Japan's most popular forms of entertainment, generating around Y30 trillion annually. The game is a hybrid of a pinball machine and a slot machine.

Meanwhile, one of the country's largest oil refiners, Cosmo Oil, announced plans to raise Y25.8 billion ($213.2 million) by securitizing cash flows from 198 gas stations. Nomura Securities will arrange the five-year deal, with proceeds used by Cosmo for capital spending.

It will be the second such issue by the refiner, following a Y33.6 billion offering in 2000, which matured in July 2005. That deal was collateralized by income from 396 stations.

Communications business Usen Corp. - whose activities range from running a cable TV station to Internet provider - is also rumored to be mulling over raising Y20 billion through securitization. Usen will sell rights to its fiber-optic Internet service in exchange for funds to finance growth strategies. The company estimates the deal to be worth two years of capital expenditure. Nikko Citigroup has been tipped as the likely arranger.

Elsewhere in Asia, Hong Kong's Pan-Asian Mortgage Company is planning another raid on the market in 2006. The firm established in 2002 by ex-Bear Stearns and Goldman Sachs banker Leland Sun completed the world's first securitization of negative equity mortgages in December 2005, a HK$257 million ($33 million) deal arranged by Standard Bank (ASR 11/22/04).

That deal came about due to the collapse of property prices that followed the Asian financial crisis in 1997 and 1998, with 20% of borrowers holding negative equity on their homes. The scheme allowed borrowers with LTVs of up to 140% to refinance at lower rates of interests than they originally paid.

As Hong Kong's property market has rebounded significantly in the past 18 months, the next deal will not feature negative equity mortgages, although the loans will still have high LTVs. Since February, Pan-Asian has been acquiring loans under its 95 Plus' program, whereby borrowers can get a LTV mortgage of 95% at competitive rates.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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