Looking back, 2004 was an excellent year for Asian securitization. Outside the traditional powerhouse Japan, both Singapore and Taiwan came to the fore, the cross border business from Korea saw a revival, and Hong Kong and Malaysia look set to provide arrangers with opportunities in 2005. On top of that, local investors finally began to fully embrace ABS paper, making the job of Asian issuers and arrangers easier going forward.
Even in a stand-out year, with a number of excellent deals, the choice for this award was relatively straight-
forward. Ever since the Hong Kong Government mandated HSBC to coordinate a HK$6 billion ($769.3 million) securitization of tunnel and bridge tolls, the full focus of the region's ABS professionals was on the deal.
Completed in May, the transaction lived up to its hype, creating a number of firsts for the ex-Japan Asia market. It was both the largest cash deal and future flow offering from the region, the first tolled facilities issue, the first to be offered to retail as well as institutional investors and the first to be listed on the Hong Kong Stock Exchange.
In addition, with 56 institutional buyers and 35,400 retail investors, the transaction had the widest distribution yet for an Asian securitization. Twenty-three placing banks and stockbrokers were involved on the retail placement. Rival bankers, somewhat lacking sportsmanship, deemed the deal an easy sell because the Hong Kong government was the issuer.
There is no doubt the issuing entity was a major factor in attracting interest from so many investors - particularly on the retail side - but all parties involved deserve enormous credit for leaving no stone unturned in the marketing effort. Aside from rounds of seminars to educate retail buyers, there was billboard advertising, press conferences, television interviews and even a Website established, updated with relevant information throughout the marketing of the deal.
Another criticism concerned pricing, with critical bankers noting the government was paying a spread over its own sovereign issues. But this was not the case according to HSBC. They calculated the government is paying net pricing of Hibor plus seven basis points for a weighted average life of four years, which compares favorably with the 14 basis point spread it pays for eight-year sovereign paper.
The fact is that HSBC Securities, Citigroup Global Markets, Clifford Chance (in its role as legal counsel to HSBC) and the government did an exceptional job, particularly given the timeframe from mandate to execution was just nine weeks.
As befits a breakthrough' award, the tunnels deal stimulated two asset classes simultaneously. Firstly, other Asian governments are getting in on the act, with Thailand, Singapore, Korea and Taiwan likely to see state-sponsored activity in 2005. Cagamas, Malaysia's secondary mortgage agency, tapped the market with a hugely successful M$1.6 billion ($421.1 million) RMBS in October.
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