Most of the buzz in Asia last week centered on Singapore, as two of the city-state's real estate investment trusts (REIT) launched CMBS transactions. CapitaMall Trust (CMT), the REIT established in 2002 by the property company CapitaLand, is coming to market with a $215 million deal via HSBC. Simultaneously, Ascendas Real Estate Investment Trust (A-REIT) - established in the same year by Ascendas-MGM Funds Limited - will issue a 142.5 million (US$174.8 million) deal arranged jointly by JPMorgan Securities and Overseas-Chinese Banking Corp. (OCBC).
HSBC has already held roadshows in Hong Kong, Singapore and three European cities, while JPM is believed to be targeting European accounts with OCBC in charge of the local placement.
When both deals are completed, year-to-date issuance from Singapore will exceed $1.4 billion. With several other transactions - mostly property related - in the pipeline, the level of activity from the Lion City is unprecedented.
There are significant differences between the latest transactions. To begin with, A-REIT is tapping the market for the first time while CMT has already completed two transactions, one in February 2002 and one in June 2003. HypoVereinsbank arranged both deals. This will be the eighth transaction linked to CapitaLand, easily Singapore's most active issuer.
The underlying assets involved are also very different. CMT's deal is backed by income on 1000 leases tied to suburban shopping malls, mainly located at Mass Rail Transit Stations - the equivalent of subway stations. With traffic of around 73 million passing through the malls each year, a source close to the deal described it as "recession-resilient."
"Suburban retail malls are at the very low end of the risk spectrum when it comes to commercial property, with industrial being at the high end, due to greater volatility in values and cash flows," claims the source. "CMT is bringing out what is considered to be one of the highest quality CMBS transactions available anywhere."
The transaction's debt service coverage ratio (DSCR) is greater than 6.5 times. "Typically for triple-A paper, you would need at least 2.8 to three times," the source added. "Consequently, this deal is ideal for investors who want their triple-A paper to be very stable and conservative."
Revenues generated by 17 of the supposedly riskier industrial properties will collateralize A-REIT's issue. However, the risk is mitigated by the diversity of the pool, which includes science and business parks, logistics centers and purpose-built buildings used for light and high-tech industry. The current DSCR is 3.36 times.
In order to cover any shortfall in rental income that may arise during the term of the deal, a SGD$18 million (US$10.5 million) liquidity facility provided by OCBC is included.
Fitch Ratings, Moody's Investors Service and Standard & Poor's have rated both transactions, which feature five-year floating-rate paper, triple-A. CMT's deal will be issued out of the Silver Maple Investment Vehicle, while A-REIT issues out of the Emerald Assets SPV.
It will be interesting to see how far apart to the deals price. No official price guidance has emerged on either deal, but bankers are understandably predicting that CMT will finish a few basis points inside.
"European accounts have taken large chunks of previous CMT and CapitaLand deals because it offers a pickup on European CMBS," commented one head of Asian ABS at a rival firm. "Similar quality European paper is trading in the mid to high 20 basis point area over Libor, compared to around 35 to 37 [basis points] for Singaporean CMBS. I would expect Silver Maple to come in the low to mid 30s with Emerald around five [basis points] wider."
Elsewhere, Thai consumer deals emerge The continuing expansion of Thailand's consumer credit sector is proving good news for the country's securitization market. In recent times, a year could pass with no deals completed. This has not been the case in 2004.
The latest issuer to step up to the plate is Scandinavian Leasing, a subsidiary of Swedish Motors Corp., with the launch of a (THB)850 million (US$20.7 million) deal backed by B1 billion of auto hire purchase receivables.
Local house Kasikornbank is the appointed lead manager for the deal, which is split into two amortizing tranches comprising B650 million of 2.5-year paper and B200 million of four-year notes. Fitch has rated both tranches A-', with significant credit support coming through 25% overcollateralization, 20% subordination and a reserve fund.
The deal comes hot on the heels of state-owned National Housing Authority's B1.2 billion offering launched a fortnight ago. Krung Thai Bank is handling that deal, backed by a pool of residential hire-purchase receivables.
Meanwhile, Citibank recently secured the mandate to arrange the second deal by the Thai subsidiary of Aeon Credit Service Co. It is believed it will be backed by credit cards. Aeon Thana Sinsap made its ABS debut in February with a B1.5 billion (US$36.8 million) hire-purchase receivables deal arranged by Standard Chartered.
Park lands at Calyon
Greg Park, formerly the head of ex-Japan Asia securitization at Credit Suisse First Boston, did not take long to resurface onto the scene (see ASR 6/14/04). However, despite widespread speculation he would be joining Morgan Stanley, Park has moved to Calyon, the investment-banking arm of France's Credit Agricole.
With immediate effect, Park will fulfill the same position at his new employers as he did at CSFB. He will lead a Hong Kong-based team focusing on ABS, RMBS and CLO transactions and reports to Jean Marc Winand, head of Asian investment banking.
Working for a French firm will not be a new phenomenon to Park. He headed up Credit Lyonnais' Asian securitization business before his spell at CSFB. As it happens, Calyon was formed in March when Credit Lyonnais' investment banking division was transferred to Credit Agricole.
CSFB has not yet appointed a direct replacement for Park, which has led bankers at rival houses to speculate that CSFB will either run its ex-Japan business out of its Tokyo office or scale back its franchise.
After a quiet period, Japan is a hive of activity once again with several transactions launched in the past week. By far, the biggest of the bunch is Nippon Shinpan's 100.8 billion ($918.9 million) deal backed by auto loans and shopping credit receivables. Merrill Lynch and UFJ International are joint lead managers on the six-year deal - which was launched out of the Ann Funding 2 trust.
Two lease-backed transactions also hit the market - a 21.5 billion offering from Showa Leasing via Resona Bank and a 20.2 billion issue from Fuyo General Lease, arranged by Mizuho Bank. Meanwhile, one of Japan's biggest consumer credit companies, Orient Corp., has launched a 12.5 billion transaction backed by installment sales receivables through the Lumiere Shopping vehicle. BNP Paribas is handling the deal.
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