A Japanese finance company is pursuing its sixth multi-currency prime auto loan securitization in a $336.5 million deal that includes several tranches of U.S.-dollar denominated bonds.

According to a presale report from Moody’s Investors Service, the OSCAR 2017-1 transaction sponsored by Orient Corp. (doing business as Orico) features four classes of notes totaling $314.9 million in U.S. dollar currency, as well as a subordinate JPY2.4 billion (US$21.06 million) fixed-rate denomination class.

The dollar-denominated bonds include a one-year $52.6 million tranche; a $136.8 million Class A-2 notes series that will be split between fixed- and floating-rate tranches due in 2020; a $66.7 million Class A-3 bonds package due 2021 and a $58.8 million Class A-4 tranche with a seven-year final maturity.  

All of the senior multi-year notes have a preliminary ‘Aaa’ structured-finance rating; the short-term A-1 notes have a provisional ‘P-1 (sf)’ money-market rating.

The yen-denominated Class M notes are rated ‘A1 (sf)’.

The notes are backed by eligible receivables in the pool with a principal balance of JPY46.14 billion (or US$405 million), through 36,128 underlying agreements that have a weighted average coupon of 6.2%.

Moody’s projects an expected cumulative gross default rate of 1.47%, in line with the performance of previous OSCAR US transactions ranging from 1.48% to 1.87%. [Moody’s does not assess loss rates due to the alternative structure of recoveries in Japanese auto loan transactions: proceeds from sales of repossessed vehicles flow to the originator through a subordinated beneficial interest rather than senior note holders.]

Moody’s notes the company takes a “meaningful” first-loss and mezzanine position in the transaction to align its interests with investors.  

The pool is split about 75%/25% between used and new vehicles that secure non-guaranteed prime loans primarily to individual customers (about 15% are issued to corporate borrowers).

Like with its second cross-currency securitization last September, Orico has a differing rate structure between the underlying loans (fixed-rate interest) and the A-2B floating rate notes to be issued. Orico plans to enter into a counterparty swap agreement in which the lender will secure alternative hedging arrangements.

Mizuho Securities acted as arranger; it’s U.S. affiliate Mizuho Seucrities USA teamed with BNP Paribas to underwrite the transaction. Orico is an affiliate of Mizuho Financial Group, which has a 49% share in the lender’s operations.

The firm has been a frequent sponsor in the U.S. securitization market with bonds backed by yen-issued loans. The latest deal is the company’s sixth asset-backed offering. While the company offers guaranteed non-prime loans to customers with riskier credit profiles, none of those loans are includes in the new OSCAR transaction.

In addition to indirect auto loans, Orico also originates installment sales loans and credit cards.

Orico’s managed portfolio of auto loan receivables totaled about JPY1,710 billion (US$15 billion) as of September 2016.

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