Shinsei Bank in Tokyo yesterday priced Y73.5 billion ($686 million) of unsecured bonds from its Hydra III Funding Corp vehicle, which securitizes a pool of housing loans. The bonds are split in three tranches. The Y67.6 billion S1 floating rate class carries a coupon of 40bp over Libor. The bonds have an average life of 4.21 years and are rated triple A by all three rating agencies.
The Y5.2 billion S2 fixed rate class carries a coupon of 1.2693%. It is also rated triple A by all three rating agencies and has an average life of 5.7 years.
The Y0.7 billion floating rate J class carries a coupon of 130bp over one month Libor. The notes are rated BBB/Baa2/BBB and have an average life of 5.47 years.
The bonds are backed by a collection of housing loans sourced from a variety of Japanese banks and finance companies, including Ibaraki Bank, Fukushima Bank, Life Housing Loan Co, Goodloan Co and Aoba Life Insurance Co.
The bonds have a number of mechanisms for supporting their credit. There is over collateralization to offset loan defaults and a diversification of the risks of default from the five banks within the pools that back the bonds. There is also a default trap mechanism as well as a mechanism for adjusting any interest rate mismatches. A liquidity reserve has also been created at closing.
The deal is the latest in a series of housing loan securitizations from Shinsei, sold under the Hydra brand. Hydra I broke new ground in March last year when it used multiple originators of housing loan assets as well as performing and non-performing collateral to back the deal. It also used a similar two-tied waterfall structure to repackage the underlying cash flows during the life of the bonds, further adding to the credit protection.
With Hydra III, Shinsei has now raised some Y259.7 billion from the three deals, although the third installment is the smallest in size. The bonds were sold as a private placement samurai deal.
