Morgan Stanley Dean Witter & Co. plans to make securitization of non-performing loans a cornerstone of its Japanese ABS business. The bank, which successfully closed the first issue backed by Japanese non-performing real estate loans (see page 12), sees a huge business opportunity in the backlog of bad loans sitting in Japanese banks.

"The potential in Japan is very, very large," said Douglas Kennedy, executive director of the securitized products group at Morgan Stanley in Tokyo. "The way we've explained it is that estimates of real estate non-performing loans in Japan are somewhere between $400 billion and $500 billion. We figure that if even one-tenth of that is eligible for securitization, we could do 250 deals exactly like the one we've just done, and that is a very attractive market for us."

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