ABN AMRO's equity derivatives department has started pitching trades to corporates allowing them to synthetically unwind corporate cross-share holdings in Japan and plans to close its first trade in the coming weeks, according to Daisuke Kikuchi, head of corporate marketing in Tokyo. "This will allow clients to dispose of their holdings," he added. Kikuchi, who joined two months ago from Westdeutsche Landesbank, where he was head of marketing in Tokyo, said he is looking to finalize the transaction with a domestic corporate. The bank is structuring the product now because it has just received internal approval.
The first trade, around JPY10 billion (USD79 million), will be structured through a special-purpose vehicle, which buys over-the-counter calls on a basket of names held by the corporate. The European-style options mature in one-year, which allow the spv to then receive the designated shares from the client. To hedge downside risk, the corporate uses the premium from the calls to enter a collar position via buying puts, creating a zero-premium hedge. Kikuchi noted that such a structure enables a company to book the trade now while preserving corporate relationships by holding onto the shares.
Kikuchi's new role at ABN includes developing this business, along with offering portfolio hedging as well as corporate funding via buying calls from clients. "This is new for ABN in Tokyo," he noted, commenting on the cross-share unwinding business. Kikuchi said he is currently looking to hire an additional marketer. ABN has similar operations for other markets including London and Asia.
