Chase Trust Bank has bought JPY11 billion (USD82.3 million) (notional) of interest-rate caps as a hedge in a securitization it structured for Japanese consumer finance company AEL Corp. It bought the caps from ING Barings, according to Udo van der Linden, v.p. of the Asian securitization group at ING in Tokyo.
Chase bought the caps for a special purpose vehicle, dubbed HABS Corp., which issued JPY11 billion of floating rate asset-backed notes secured by a portfolio of approximately 34,000 fixed-rate consumer loan receivables. As the underlying assets are fixed-rate and the notes floating rate, ING structured the transaction with five-year interest-rate caps at 2%, to hedge against the possibility of rates rising. One-month yen LIBOR was at 0.0112% on March 1. "We needed that amount and level of caps to satisfy rating requirements," noted van der Linden. If floating rates rise above the 2% mark, Chase would channel the payoff directly to the master trust. He declined to comment on the cost of the interest-rate caps. Fitch Ratings and Standard & Poor's rated the issue AA while Moody's Investors Service put it at Aa2.
An official at Chase Trust in Tokyo referred calls to ING.
