NU Online News Service, Aug. 20, 5:26 p.m. – Standard & Poor’s, New York, has given preliminary investment-grade credit ratings to 60 billion yen, or $500 million, in notes backed by subordinated debt from two Tokyo life insurers, Yasuda Mutual Life Insurance Company and Fukoku Mutual Life Insurance Company.

The insurers have set up an unusual joint special purpose company, the FLY 21 Funding Tokuteki Mokuteki Kaisha, to issue two groups of notes, Series 1 Class A and Series 1 Class B.

S&P has given the Class A notes a preliminary rating of A-, and the Class B notes a preliminary rating of BBB.

“Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings,” S&P writes in a discussion of its ratings.

Japanese regulators let insurers use a special kind of subordinated debt called “kikin” debt increase their statutory capital reserves to the minimum required level.

The FLY21 notes would be the second series backed by kikin debt, and the first backed by the kikin debt of two Japanese life insurance companies, S&P says.

S&P analysts considered the BBB ratings on the underlying subordinated debt, the bankruptcy laws governing Japanese special purpose companies, and other issues when they set the preliminary ratings, S&P says.