Japan's most prolific securitizer, Orient Corp. (Orico) was back in the international markets at the beginning of the month with the sixth autoloan securitization in its Oscar Funding series. As usual, the deal was lead managed by Dai-Ichi Kangyo International's London ABS team.
The transaction is the first Oscar deal of the year and is split into a dollar-denominated tranche worth $222 million and a piece in euros worth E110 million ($98 million).
The currency split is designed to help fulfill the issuer's primary reasons for turning to the international markets, rather than selling its paper in the low interest rate environment in Japan: to increase the diversity of its investors and to decrease the reliance on the domestic markets and Japanese banks.
To this end, the deal was sold to a satisfying mix of investors who are new to the series and those who have bought previous Oscar deals, said Richard Tarn of DKBI.
"The deal is oversubscribed and we've got quite a few new people, which is part of the remit that was set by Orico," he said. "But it's also good to see people coming back because it shows that they are happy with the way that previous deals have gone."
Coming in at 26 basis points over dollar Libor and Euribor for the respective tranches, Oscar VI is the most tightly priced of the series so far, particularly as its expected average life is the longest yet at 1.8 years.
This simply reflects the supply/demand fundamentals, said Tarn. There is much less international issuance of deals backed by Japanese assets because issuers can get remarkably tight prices in the domestic market, yet international investors are still keen to get their hands on transactions backed by cashflows from Japan's reliable individual obligors.
"The historic performance of the series has certainly been good; the deals have performed in line with expectations and that is during the worst downturn in Japan since the Second World War," Tarn said, adding that the deal also gives investors the chance to increase the geographical diversity of their portfolios.
The paper was placed in the U.K., Ireland, continental Europe and the Middle East, with a small portion going to non-Japan Asia.
Market pros in Tokyo added that securitization is a perfect technique for a highly indebted company like Orico, which is leveraged massively and consequently rated at double-B level. It means that it can raise money on the strength of its asset quality and does not have to rely on expensive and increasingly scarce bank funding.
In fact, the company has announced plans to rely even more heavily on securitization - both foreign and domestic - saying that by the end of March 2001 it will have 520 billion in outstanding securitizations, an increase of 12% from a year earlier.
