CORRESP 1 filename1.htm CORRESPONDENCE

April 20, 2022

Ms. Michelle Miller

Ms. Sharon Blume

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Re: ORIX Corporation

Form 20-F for the Fiscal Period Ending March 31, 2021

Filed June 29, 2021 File 001-14856

Dear Ms. Miller and Ms. Blume:

This letter is in response to the comment letter of the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) dated April 7, 2022 relating to the Form 20-F for the fiscal year ended March 31, 2021 (the “2021 Form 20-F”) of ORIX Corporation (the “Company”).

The Company’s responses to the Staff’s comments are set forth below. References to the “Company,” “we,” “us” and “our” in the responses set forth below are to the Company, unless the context otherwise requires.

Comment 1:

Form 20-F for the Fiscal Period Ending March 31, 2021

Allowance for doubtful receivables and probable loan losses and allowance for credit losses, page 63

 

1.

We note your response to prior comment 2, including the provision benefit of ¥ 7,437 for off-balance sheet credit exposures. We also note on page F-28, that upon adoption of ASU 2016-13, you recognized a provision of ¥ 28,294 related to off-balance sheet credit exposures such as financial guarantees and loan commitments and as disclosed on page F133, as of March 31, 2021 the allowance for off-balance sheet credit exposure was ¥ 26,094. Please tell us and revise your proposed disclosure to explain how you accounted for the provision benefit of ¥ 7,437, considering also that total commercial commitments as disclosed on page 105 of ¥ 1,272,096 increased from March 31, 2020.

Response to Comment 1:

We acknowledge the Staff’s comments. Prior to adoption of Accounting Standards Update 2016-13 (“ASU2016-13”), an allowance of ¥5,424 million was recorded for off-balance sheet credit exposures as of March 31, 2020. Upon adoption of ASU2016-13 on April 1, 2020, a provision of ¥28,294 was recorded as a cumulative effect through retained earnings as described on F-28 and the balance of allowance for credit losses related to off balance sheet credit exposures totaled ¥33,718 million as of April 1, 2020.

The allowance for credit losses for off-balance sheet credit exposures was decreased by ¥7,624 million from ¥33,718 million to ¥26,094 million during the fiscal year ended March 31, 2021, due mainly to a reversal of the allowance of ¥7,437 million.

 

     (Millions of yen)  

Allowance prior to adoption of ASU2016-13

    ¥ 5,424  

Cumulative adjustment related to adoption of ASU2016-13

      28,294  
  

 

 

  

Beginning balance of allowance for credit losses upon adoption of ASU2016-13

      33,718  

Provision (reversal)

      (7,437 ) 

Charge-off/recoveries

      (101 ) 

Other (*)

      (86 ) 
  

 

 

  

Ending balance of allowance for credit losses

    ¥ 26,094  
  

 

 

  

 

  (*)

Other mainly includes foreign currency translation adjustments and a decrease in allowance related to a sale of a subsidiary.

The reversal of the allowance was mainly caused by a decrease in outstanding financial guarantees of card loans and other credit facilities extended by Japanese financial institutions as a result of restrained customer demand for funds and an increase in repayments reflecting changes in consumer behavior due to COVID-19.

Please note that the amount of total commercial commitments disclosed on page 105 included financial guarantees and financial commitment agreements which were not subject to the scope of Topic 326, such as unexecuted commitments to fund construction and other costs to complete ongoing real estate development projects and agreements, to invest in funds, as long as the agreed-upon terms are met.

In response to your request, we will add an explanation as note 1 to the following reconciliation table of the provision for credit losses, which was proposed in our response to the comment 2 in our previous response letter filed on March 1, 2022. Furthermore, we will add an explanation for the reversal of the allowance for off-balance sheet credit exposures in the Note 33. Commitments, Guarantees and Contingent Liabilities.

“Allowance for doubtful receivables and probable loan losses and allowance for credit losses” of Item 5 “Operating and Financial Review and Prospects—Details of Operating Results” on page 63 in the 2021 Form 20-F

 

     Year ended March 31,  
     2020      2021  
     (Millions of yen)  

Provision (Reversal):

      

Net investment in leases

      3,304        3,285  
  

 

 

     

 

 

  

Loans not individually assessed for credit losses

      14,920        580  
  

 

 

     

 

 

  

Loans individually assessed for credit losses

      6,201        15,248  
  

 

 

     

 

 

  

Sub-total

      24,425        19,113  
  

 

 

     

 

 

  

Others:

      

Off-balance sheet credit exposures (Note1)

      0        (7,437 ) 
  

 

 

     

 

 

  

Available-for-Sale Debt Securities

      0        117  
  

 

 

     

 

 

  

Accounts receivable *

      0        4,228  
  

 

 

     

 

 

  

Provision for doubtful receivables and probable loan losses / provision for credit losses in the consolidated statement of income

      24,425        16,021  
  

 

 

     

 

 

  

 

  *

Accounts receivable was included in installment loans before 2020.

Note 1: The reversal of the allowance was mainly caused by a decrease in outstanding financial guarantees of card loans and other credit facilities extended by Japanese financial institutions as a result of restrained customer demand for funds and an increase in repayments reflecting changes in consumer behavior due to COVID-19.

Note 33 “Commitments, Guarantees and Contingent Liabilities” on page F-133 in the 2021 From 20-F

Allowance for off-balance sheet credit exposures—Since April 1, 2020, Credit Losses Standard has been adopted. If the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable by the entity, credit losses related the loan commitments of card loans and installment loans and financial guarantees are in the scope of the allowance for credit losses. For the loan commitments of card loans and installment loans, credit losses are recognized on the loan commitments for the portion expected to be drawn. For financial guarantees, the allowance is recognized for the contingent obligation which generates credit risk exposures. These allowance for off-balance sheet credit exposures is measured using the same measurement objectives as the allowance for loans and net investment leases, considering quantitative and qualitative factors including historical loss experience, current conditions and reasonable and supportable forecasts. The allowance for off-balance sheet credit exposure is accounted for in other liabilities on the consolidated balance sheets and the amount was ¥26,094 million as of March 31, 2021. Additionally, provision for credit losses in the consolidated statements of income included reversals of ¥7,437 million, which was mainly caused by a decrease in outstanding financial guarantees of card loans and other credit facilities extended by Japanese financial institutions as a result of restrained customer demand for funds and an increase in repayments reflecting changes in consumer behavior due to COVID-19.

Comment 2:

Note 11. Credit Quality of Financial Assets and the Allowance for Credit Losses, page F-65

 

2.

We note your response to prior comment 3 and your enhanced proposed disclosure. In future filings, please also disaggregate your installment loan categories as present in your allowance for credit loss rollforward disclosed on page F-66 and your non-accrual loans disclosed on page F-72, consistent with the installment loan categories disclosed in Note. 9 on page F-54 to provide investors with additional information concerning the credit quality of your loan and lease portfolio. Refer to ASC 325-20-50-4. Please provide us with your revised enhanced disclosure.

Response to Comment 2:

In response to your request, we will revise the categories presented in the allowance for credit loss rollforward disclosed on page F-66 and the non-accrual loans disclosed on page F-72 to be consistent with the installment loan categories disclosed in Note 9 on page F-54.

In addition, we will revise part of the installment loan categories disclosed in Note 9 as set forth below, and make corresponding changes to the categories presented in the allowance for credit loss rollforward and the non-accrual loans based on the revised categories in future filings to ensure that they are disclosed consistently.

Note 9 “Installment Loans” on page F-54 in the 2021 Form 20-F

Draft revised Note 9 Installment Loans

 

     Millions of yen  
     2021  

Borrowers in Japan:

 

Consumer—

 

Real estate loans

      ¥1,995,031  

Card loans

      188,547  

Other

      27,698  
  

 

 

  
     2,211,276  
  

 

 

  

Corporate—

 

Real estate companies

      279,046  

Non-recourse loans

      47,956  

Commercial, industrial and other companies

      203,890  
  

 

 

  
     530,892  
  

 

 

  

Overseas:

 

Consumer—

 

Real estate loans

      ¥75,890 (*) 

Other

      26,192 (*) 
  

 

 

  
     102,082  
  

 

 

  

Corporate—

 

Real estate companies

      197,074  

Non-recourse loans

      113,129  

Commercial, industrial companies and other

      503,980 (*) 
  

 

 

  
     814,183  
  

 

 

  

Purchased loans

      12,351  
  

 

 

  
     ¥3,670,784  
  

 

 

  

 

  (*)

Items subdivided by this revision

Allowance for credit loss rollforward in Note 11 “Credit Quality of Financial Assets and the Allowance for Credit Losses” beginning on page F-65 in the 2021 Form 20-F

Draft revised allowance for credit loss rollforward disclosed on page F-66

 

Fiscal Year ended March 31, 2021

Millions of yen

    Beginning
balance		     Cumulative
effect of
adopting
According
Standards
Update
2016-13		     Reclassification
to allowance
for investment
in operating
leases		     Balance at
April 1,
2020		     Provision
(Reversal)		     Allowance of
purchased
loans
during the
reporting
period		     Charge-offs     Recoveries     Other     Ending
balance		     Collective
(pool)
assessment		     Individual
assessment		  

Consumer borrowers:

                        

Japan real estate loans

   ¥ 3,112     ¥ 2,856     ¥ 0     ¥ 5,968     ¥ 390     ¥ 0     ¥ (495 )    ¥ 59     ¥ 0     ¥ 5,922     ¥ 5,354     ¥ 568  

Overseas real estate loans

     128       (102 )      0       26       412       0       0       1       31       470       470       0  

Japan card loans

     3,785       12,146       0       15,931       (802 )      0       (2,150 )      6       (1 )      12,984       12,283       701  

Japan other

     12,735       (963 )      0       11,772       5,875       0       (9,296 )      8       0       8,359       5,616       2,743  

Overseas other

     782       563       0       1,345       739       0       (1,754 )      577       368       1,275       1,038       237  

Corporate borrowers:

                        

Japan non-recourse loans

     13       24       0       37       (5 )      0       0       0       0       32       32       0  

Overseas non-recourse loans

     1,773       1,577       0       3,350       43       0       0       0       57       3,450       3,218       232  

Japan real estate companies

     983       46       0       1,029       (58 )      0       (96 )      25       1       901       621       280  

Overseas real estate companies

     2,010       1,579       0       3,589       (1,502 )      0       (570 )      33       (11 )      1,539       1,539       0  

Japan commercial, industrial companies

     2,447       98       0       2,545       (27 )      0       (592 )      11       1       1,938       199       1,739  

Overseas commercial, industrial companies and other

     14,769       9,002       0       23,771       10,410       0       (15,427 )      18       (9 )      18,763       13,013       5,750  

Purchased loans:

     1,458       0       0       1,458       353       3,899       (4,040 )      46       119       1,835       681       1,154  

Net investment in leases:

     11,692       3,550       0       15,242       3,285       0       (2,668 )      10       653       16,522       13,267       3,255  

Other financial assets measured at amortized cost:

     1,149       1,369       (312 )      2,206       4,483       0       (344 )      11       (351 )      6,005       810       5,195  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   ¥ 56,836     ¥ 31,745     ¥ (312 )    ¥ 88,269     ¥ 23,596     ¥ 3,899     ¥ (37,432 )    ¥ 805     ¥ 858     ¥ 79,995     ¥ 58,141     ¥ 21,854  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-accrual loans disclosed in Note 11 “Credit Quality of Financial Assets and the Allowance for Credit Losses” beginning on page F-65 in the 2021 Form 20-F

Draft revised non-accrual loans disclosed on page F-72

 

    

March 31, 2021

  
          Millions of yen  
    

Class

    Beginning
balance		      Ending
balance		      Interest income
recognized
during the
reporting
period		      Balance not
associated
allowance for
credit losses
among
financial  assets
measured at
amortized cost,
which is
suspending
recognition of
income		  

Non-accrual of financial assets:

               

Consumer borrowers

       ¥ 13,607      ¥ 10,322      ¥ 519      ¥ 736  
   Japan real estate loans      2,469        1,976        194        424  
   Overseas real estate loans      0        570        0        268  
   Japan card loans      2,114        1,115        50        0  
   Japan other      8,611        5,970        275        44  
   Overseas other      413        691        0        0  

Corporate borrowers

         44,622        53,820        229        10,572  

Non-recourse loans

    The Americas      2,466        10,148        0        0  

Other than Non-recourse loans

    Japan real estate companies      586        778        30        509  
   Overseas real estate companies      12,491        14,505        0        0  
   Japan commercial, industrial companies      2,409        1,993        196        127  
   Overseas commercial, industrial companies and other      26,670        26,396        3        9,936  

Net investment in leases

         15,346        17,166        0        0  
     

 

 

     

 

 

     

 

 

     

 

 

  

Total

       ¥ 73,575      ¥ 81,308      ¥ 748      ¥ 11,308  
     

 

 

     

 

 

     

 

 

     

 

 

  

* * * * *

If you have any questions about this response letter or any further comments on ORIX’s 2021 Form 20-F, please do not hesitate to contact Hitomaro Yano of ORIX Corporation in Tokyo (Tel: +81-3-3435- 3100; Fax: +81-3-3435-3015) or Jon Gray or Christopher Kodama of Davis Polk & Wardwell LLP in Tokyo (Tel: +81-3-5574-2667; Fax: +81-3-5574-2867 or Tel: +81-3-5574-2668; Fax: +81-3-5574-2868).

 

Sincerely yours,

/s/ Hitomaro Yano

Hitomaro Yano
Executive Officer and Head of Treasury and Accounting Headquarters
ORIX Corporation

 

cc:

Yutaka Terasawa

KPMG AZSA & Co.

Jon Gray, Esq.

Christopher Kodama, Esq.

Davis Polk & Wardwell LLP