Orico (or Oriental Corp.), a Japanese finance company partly owned by Mizuho Financial Group, is offering $362.2 million of bonds backed by yen-denominated prime auto loans issued to individual and corporate borrowers in Japan.

The deal, dubbed OSCAR US 2016-2, consists of four tranches of notes, each with a triple-A ratings from both Moody’s Investors Service and Standard & Poor’s.  

There is a $51.5 million money-market tranche maturing in September 2017, $157.3 million of notes maturing in 2018, a mix of fixed-rate and floating-rate, $82.5 million of fixed-rate notes maturing in 2020,  and $70.9 million of fixed-rate notes due in 2023.

Besides the cross-currency nature of the transaction, there is also a differing rate structure between the underlying loans (fixed-rate interest) and the A-2B floating rate notes to be issued. Orico has entered into a contract with a highly-rated swap counterparty that requires Orico to secure alternative hedging arrangements as well as posting cash collateral in the event of a downgrade.

OSCAR 2016-2, which is underwritten by Mizuho Securities USA and arranged by Mizuho Securities Co., Ltd., is backed by 34,712 new and used auto loans issued in yen currency totaling JPY 47.9 billion, or approximately U.S. $468.9 million. The loans are issued indirectly through auto dealers that have a membership agreement with Orico’s branch network.

Mizuho Financial Group (MHFG) holds a 49% stake in the shares of Orico, which is an equity-method affiliate of MHFG.

Tokyo-based Orico originated by prime vehicle loans and those of “substandard” credit ranking which benefit from backing by a domestic credit guarantee scheme  (CGS) through CAL Credit Guarantee Co., Ltd., according to Moody’s. The ratings agency notes none of the assets in the OSCAR US 2016-2 pool are loans from its higher-risk guaranteed lending program. 

Orico, a frequent sponsor of prime auto loan receivables securitizations in the U.S. since 1998, is offering its fifth securitization using the OSCAR trust. Orico also has issued asset-backed transactions in the U.S. for installment sales and credit card receivables for the past 23 years.

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