After nearly disappearing from the asset-backed securities market, ORIX Credit Alliance stepped out of a five-year hiatus this month, pricing a $200 million equipment lease-backed deal in the public term market - the first of plenty more, said Joseph McDevitt, chief financial officer and executive vice president at ORIX.

"We had been using conduits previously," McDevitt explained. "This is not really a return to market, but really a shift from the conduits back into the public market, because we felt that we could get better pricing."

The company could not have picked a better time, as ORIX came during the pre-holiday surge, when demand reeled in spreads to levels unseen in months.

"It all went extremely well," said McDevitt. "Public deals are easier to get done than conduits, because there is no concern about liquidity back-up - there's no concern about matching assets and liabilities from amortizing swaps."

The transaction was structured in six parts. A 0.36-year, $56 million A-1 class priced at five basis points over four-month Libor; a one-year, $38.5 million A-2 class priced at 39 basis points over 12-month EDSF; a two-year, $73.4 million A-3 class priced at 93 basis points over U.S. Treasurys; a 2.81-year, $27 million A-4 class priced at 100 basis points over U.S. Treasurys; and two 1.88-year subordinates - a B-class and a C-class worth $9 million combined - priced at 145 basis points over U.S. Treasurys and 200 basis points over U.S. Treasurys, respectively.

First Union Capital Markets managed the deal, and will likely manage the next deal as well.

"We've had a banking relationship with them for years," he said. "At least the next deal will be with First Union. We're very happy with them. They did a very good job."

No Gains Upon Sale

A unique aspect of this transaction, McDevitt explained, is that it won't show up on ORIX's balance sheet.

"We grew to dislike gain-on-sale accounting because our earnings were fluctuating dramatically based on the timing of our securitization transactions," he said. "We've done securitizations only and solely for the purpose of varying our funding sources, and when we've postponed a month, or maybe to a different quarter or fiscal year, our earnings would fluctuate, and we just grew weary of fluctuating our earnings based on funding."

He added that gain-on-sale accounting, in terms of securitization, takes profit from future years and converts it to current revenues, which the company finds undesirable.

Regardless of where the numbers are penned in, ORIX is planning to hit market again "certainly by mid next year, within the next six months, maybe sooner."

Interestingly, ORIX's last deal, back in 1994, was also worth about $200 million. Going forward, McDevitt explained, the deals should keep to this size range.

"I don't like to do too much at one time, because I prefer to spread out my risk as far as possible," said McDevitt. "We will probably keep doing this regularly or reverting back to conduits, based on what sort of market conditions there are, and the attractiveness of the financing."

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