Japanese auto financier Orient Corp. (Orico) is bringing $467.6 million of asset-backed securities to market in a deal that’s expected to close July 30. The notes were rated by Moody’s Investors Service and Fitch Ratings.
The deal is Orico’s second this year, propping up the lender’s U.S. ABS volume to nearly $1 billion. The latest transaction consists of 49,686 prime loans originated and serviced by Orico, with 72% of the loans for used vehicles. Orico’s securitization is the Japanese lender’s 11th transaction in the U.S. market.
The issuance is the largest U.S. dollar amount for the Japanese auto lender, up 7% from its first securitization this year. The deal brings the lender’s total U.S. ABS volume to almost $3 billion.
While the notes are denominated in U.S. dollars, the auto loans are denominated in Japanese yen. As such, Orico has entered into a currency swap arrangement with BNP Paribas to hedge against the cross-currency risk, the deal’s leading risk factor, according to Moody’s.
Recovery from vehicles is also assessed differently and deemed a risk factor for the deal. “We assess the gross default rate rather than loss rate in our analysis of Japanese auto loan ABS because we assume a zero recovery rate for the transaction,” Moody’s noted.
