Hsinchu International Bank was set to price the first cross-border residential mortgage backed securitization out of Taiwan. Calyon Securities is sole lead manager on the 250 million ($301 million) issue and will also provide the swap to mitigate currency and interest rate mismatches.
The deal, issued out of the Hsinchu International Mortgage 1 SPV, is backed by a static pool of 6,921 first-ranking loans with a current balance of NT$13.1 billion ($391.1 billion). The weighted average seasoning of the portfolio is roughly 14 months, while the LTV is 65.6%.
With 37% of the loans originated in areas that have experienced earthquake activity, all the mortgages have earthquake insurance covering up to NT$1.2 billion.
Moody's Investors Service has provisionally assigned Aaa' ratings to the notes, which have expected average lives of 3.5 years, due to an unconditional guarantee provided by Ambac. On a stand-alone basis, the deal is rated Aa3' largely due to the credit quality of the portfolio and 15% subordination provided by the seller certificate, to be retained by the borrower.
Hsinchu completed early last week a series of roadshows in major Asian and European cities. According to investors, price guidance is 15 to 17 basis points over Euribor, with closing expected on Dec. 22.
Given the comfort provided by a monoline wrap, those spreads offer investors gains over recent new RMBS offerings from European borrowers, where three-year paper has trades between 8 to 10 basis points over Euribor.
It is hard to ascertain any cost advantage for Hsinchu choosing the international over the domestic market. While local currency RMBS issuance was commonplace in 2004, no deals have been issued publicly in 2005. Most of the recent focus has been on CBO transactions designed to address the dire financial situation facing Taiwanese bond funds.
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