Malaysia's Alliance Investment Bank (AIB) last week launched an M$800 million ($216.4 million) primary collateralized loan obligation (CLO), which has a maturity of five-years and will be sold via the Idaman Capital special purpose vehicle.

AIB arranged the transaction - its second CLO - and will jointly lead the underwriting effort with Singapore's DBS Bank. The two banks will this week meet with investors in Malaysia, Hong Kong and Singapore. While some neutrals may look at the marketing of the deal outside Malaysia as a sensible plan, one banker well versed in the country's ABS scene thought otherwise.

"The marketing approach on this deal has been a disappointment. These bonds have been peddled on the Malaysian market for the past six months," the banker said. "Some players think the offshore sale smacks of desperation - even now it is only the originator and DBS who have agreed to fully underwrite the deal."

Under the terms of the deal, AIB will sell to the SPV the rights to loans extended to 25 corporate borrowers across 17 industries. Investors will receive payment based on the principal and interest of the loans.

According to Rating Agency Malaysia, the weighted average rating of the obligors is BBB1'. Credit enhancement will come through overcollateralization, liquidity reserve and accrued excess spread.

As with most Malaysian debt offerings, AIB's CLO is fully underwritten with pricing for the four publicly offered fixed-rate tranches set before book building begins. Arrangers take the paper onto their books at a certain level and try and make money by selling down the bonds at a tighter price. This is more profitable for banks than the structuring fees.

AIB's deal features two super senior tranches, rated AAA', totaling M$480 million and offering a coupon of 5.8%. The M$220 million senior notes - also rated triple-A - pay 6.10% while the M$20 million AA2-rated mezzanine piece is priced at 7.2%. In addition, the M$80 million subordinated piece - rated B3' - will pay an undisclosed variable rate of interest.

As of press time, five-year government bonds were trading at 3.93%. Aside from Cagamas - the state's secondary mortgage agency - most Malaysian ABS deals price significantly outside the government benchmarks, reflecting the relative scarcity of issuance and investor caution.

AIB in May 2004 completed a M$1 billion CLO via the Kerisma SPV (ASR, 5/31/04). While it is over two years since that deal, it bears strong similarities to the bank's latest offering, with the senior notes also paying 5.8%.

Staying in Malaysia, RHB Investment Bank is looking to launch in mid-November its own primary CLO. The bank is working with Nomura Securities on a M$1 billion offering. It is the fourth time Nomura has structured a Malaysian CLO. In September 2005, the bank acted as adviser on Malaysian International Merchant Banker's $1 billion transaction (ASR, 9/12/05).

Meanwhile, sentiment towards South Korean cross-border offerings will get an early examination following the nuclear tests by North Korea, conducted in the face of widespread international condemnation.

Benchmark issuer Standard Chartered First Bank (SCFB) will proceed as planned with its sixth cross-border MBS, arranged by its parent Standard Chartered. According to bankers, the deal has even been upsized from $1 billion-equivalent to $1.2 billion, which will make it ex-Japan Asia's largest ever cash securitization.

SCFB last week met with investors in Asia and will this week hold roadshows in major European cities. Pricing is expected within the next two weeks. A well-placed source said the notes would be issued in euros and U.S. dollars, with tranches ranging from triple-A to triple-B. Despite the geopolitical situation emerging in the Korean Peninsula, the source added the deal will be unwrapped. All the borrower's previous public offerings have carried monoline guarantees.

Although SCFB has proved a popular credit among offshore investors since its debut in 2004, some bankers not involved in the deal wondered whether the decision to do an unwrapped deal would be reversed.

"It is in times like this the wrap comes into its own, particularly as it is the first time they have used the senior/subordinated structure," one Asian ABS head said. "With just one lead manager involved this time round for such a large deal, it may be used an excuse by investors to ask for more spread."

Meanwhile, activity in Korea's domestic asset-backed market continued to tail off in the third quarter. According to the Financial Supervisory Service, issuance totaled KRW1.5 trillion ($1.6 billion), a 77.3% drop on the same period last year. The regulator attributed much of the decline to the slumping property market, with developers not requiring funding for new projects.

Elsewhere, HSBC has secured the mandate for the latest MBS by Hong Kong Mortgage Corp. (HKMC), the territory's state-controlled secondary mortgage agency. HSBC fended off a bid from Standard Chartered to arrange a HK$1 billion ($128.3 million) to HK$2 billion deal via HKMC's Bauhinia SPV.

HKMC last tapped the market in October 2004, with a HK$2 billion issue, also arranged by HSBC (ASR, 10/25/04).

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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