JAPAN Trends and Developments Contributed by: Daniel Jarrett and Hirofumi Kaji, Atsumi & Sakai
a result of (i) the enactment of the Act on the Securitisation of Assets in 1993, which made it possible to use a special-purpose company offering tax advantages; (ii) the enactment of the Act on Special Provisions for the Civil Code Concerning the Perfection Requirements for the Claims (currently the Act on Special Provisions, etc, of the Civil Code Concerning the Perfection Requirements for the Assignment of Movables and Claims) (Act No 104 of 1998), which made it possible to perfect an assignment of claims by way of registration of assignment of claims; and (iii) the enactment of the Act on Special Meas - ures Concerning Claim Management and Col - lection Business (Act No 126 of 1998). The sys - tems under limbs (i) through (iii) above continue to apply in relation to the disposal of monetary claim transactions, including new NPLs. Currently, in addition to bulk sale, securitisation techniques that incorporate credit enhancement mechanisms, such as preferred-subordinated structures, can be used to de-recognise NPLs from balance sheets by selling the preferred por - tion to investors. A market for high-yield bonds or leveraged loans consisting of those with a relatively high credit risk that are not classified as NPLs could also be created. In an environment where know-how of credit management expertise has not yet been accumulated, it has proven difficult to provide middle-risk borrowers with loans that bring ade - quate returns to lenders. However, there is room for such market expansion in the future.
The Development Bank of Japan’s launch of a fund specialising in debtor-in-possession financ - ing is a pioneering example. Credit portfolio management (CPM) using secu - ritisation techniques could also be considered in Securitisation activity stagnated in Japan fol - lowing the 2008 financial crisis. This was due in part to the excessively low interest rates, making debt investments (including securitised securities) less attractive, and partly because the transaction costs of securitisation could not be absorbed by the arranger or originator (because otherwise they were not able to offer investors an attractive product). However, even in such an environment, there has been steady progress in technology innovation in relation to securitisa - tion, and the formation of further new markets for securitisation is expected to be considered in the near future. this context. Conclusion
220 CHAMBERS.COM
Powered by FlippingBook