Taishin International Bank has completed Taiwan's second mortgage-backed securitization, a NT$4.4 billion (US$131 million) issue arranged by Citigroup Global Markets with Taiwan Securities and E-Sun Securities co-managers. The three-tranche deal - issued through Taishin Mortgage Loan Securitization Trust 2004-1 - comes a month after First Commercial Bank kick-started the country's MBS market with a NT$4.28 billion offering via Deutsche Bank.

Like the FCB deal, Taishin achieved pricing of 25 basis points over the adjustable mortgage rate for the 2.32-year triple-A tranche. However, Citibank was able to sell the 4.98-year single-A notes at 60 basis points, five inside the FCB deal, while also including a triple-B piece, which priced at 85 over the ARM.

Both deals employed a simple pass-through structure. The principle difference between the two is that Taishin included government-subsidized loans in its portfolio, as well as ARM loans.

According to a banker involved, the deal placed well with banks, credit unions, insurance companies and bill finance companies. "There was good interest in the subordinated tranches, particularly from insurance companies looking for extra tenor and yield," commented the banker. "The interest from banks was partly driven by wanting access to mortgage risk without increasing their origination."

With Taiwanese banks holding large mortgage portfolios on their books, the potential for MBS issuance is huge. However, the banker stressed that some tweaking to Taiwan's securitization laws is needed before it can be fully realized. "There is scope to tap into a broader investor base by bringing in new structures," she said. "But at the moment, the laws don't allow for seller interest and you can't include revolving mortgages or fixed rate loans, which is what most banks would like to securitize."

As for the broader prospects of the market, the near-term focus will be homogenous consumer assets, such as auto loans, credit cards and personal loans, which are more straightforward for local rating agencies.

Citigroup will now turn its attention to the Hong Kong government's HK$6 billion (US$770 million) securitization of toll revenues from five tunnels and the Lantau Link, a deal which Citi jointly leading manager with HSBC Securities. According to bankers in Hong Kong, the transaction is expected to launch within the next two weeks. The issue - which will include U.S. and Hong Kong-dollar paper - will be rated by Fitch Ratings, Moody's Investors Service and Standard & Poor's. Ratings are expected to be between double-A and double-A plus.

Elsewhere in Asia

This month the Japan Bank for International Cooperation (JBIC) will launch one of 2004's more interesting deals. The bank - whose principle business involves lending to support Japanese economic activities overseas - will securitize credit extended by two Japanese trading companies to the Indonesian government for the purchase of power plants and equipment. Goldman Sachs is lead manager on the Y13.9 billion (US$131.4 million) issue.

Essentially, JBIC will convert the credit lines into direct loans to the Indonesian government, enabling the trading companies to remove the loans from their balance sheets and initiate new business in the country. If the deal is successful, it could pave the way for similar transactions with credit extended to the Philippines, Thailand, China and Vietnam.

JBIC will securitize the Y10.9 billion of credit that is covered by trade insurance. Rating and Investment Information has rated the deal - effectively guaranteed by the Japanese government - triple-A, even though Indonesia is rated single-B.

As ASR went to press, the Singaporean property company CapitaLand was set to launch its third deal of 2004, with HypoVereinsbank again in the role of lead manager. According to a well-placed source, HVB has been roadshowing the US$155.6 million deal in Europe, with additional interest expected from U.S. investors. The transaction - called Arwin Investment Limited - will securitize two residential freehold developments in the Lion City - The Imperial and Botanics on Lloyd. It features US$126 million of triple-A notes with the expected maturity date October 2006.

Nomura Securities is putting the final touches to an M$1 billion (US$263.1 million) primary collateralized loan obligation in Malaysia, the repeat of a successful offering from November 2002. A banker involved in the transaction told ASR he expected the new deal to be completed by the end of April. The previous transaction - Aegis One - was backed by loans to 25 listed companies. Structured as five-year bullets with a 5.2% coupon, the deal was the first Malaysian securitization to attract wide investor interest as the bonds offered a pick-up of around 100 basis points on triple-A corporate bonds.

Elsewhere in Malaysia, HSBC is continuing to work on an auto loans deal for Sime Credit, which is expected to launch in May.


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