Japan's Aozora to securitise $3.5 bln in loans

TOKYO Mon Dec 15, 2008 5:46am EST

TOKYO Dec 15 (Reuters) - Aozora Bank (8304.T), the Japanese lender majority owned by U.S. fund Cerberus Capital Management [CBS.UL], said it will securitise $3.5 billion worth of loans, its largest such securitisation in at least two years.

The bank, whose stock has plunged more than 80 percent since its public listing in November 2006, said in a statement it had entrusted 319.9 billion yen ($3.5 billion) of loan receivables to its trust bank unit, with the intention of creating securitised products.

Loan receivables are the income stream from borrowers repaying their loans.

A spokesman for Aozora, Tsutomu Jimbo, said the move was to better utilise the bank's assets. He confirmed it was Aozora's largest such securitisation since its public listing.

Securitisation, which involves banks pooling assets such as mortgages and reselling them to investors for a fee, was a prime factor in spreading the risk and losses from U.S. subprime mortgages globally.

The move came after the bank scrapped plans last week to issue a 5-year debenture, citing market conditions. That marked the third straight month that Aozora had scrapped plans for such a debenture.

A different spokesman for the bank said the securitisation was not related to the bank's decision to forego issuing the bonds.

Shares of Aozora finished up 2.1 percent at 97 yen ahead of the announcement, underperforming a 5.2 percent rise in Tokyo's index of bank stocks .IBNKS.T. (Reporting by David Dolan; Editing by Edwina Gibbs)

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