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Cagamas Islamic MBS soars

After scoring a blowout success last October with its M$1.6 billion ($426.5 million) maiden MBS deal (see ASR 10/18/04), hopes were high for the first Islamic MBS by Cagamas, Malaysia's secondary mortgage agency. And the M$2.05 billion deal, arranged and lead managed jointly by Commerce International Merchant Bankers and HSBC Securities, lived up to its billing with over 6.5 times oversubscription and attracting interest from over 80 accounts, sources reported.

With such strong demand, the deal was able to price through the nominal coupons attached to Cagamas' conventional MBS paper, further demonstrating how Islamic issuance continues to lead the way in Malaysian securitization.

The deal featured six tranches, all rated triple-A by Rating Agency Malaysia and Malaysian Rating Corp. The three-year notes, marketed in the range of 27 to 37 basis points over Malaysian Government Securities, priced at 3.41%, a 30 basis point spread over MGS. This was inside the 3.7% offered on Cagamas' debut, although these notes were trading at 3.37% in recent secondary market activity.

The five-year notes, marketed in the 45 to 55 basis point range over MGS, priced to yield 3.84%, or 48 basis points over MGS. The equivalent tranche in Cagamas' debut currently trades at 4%. In addition, the seven-year tranche, offered at 46 to 56 basis points over MGS, pays 4.24%, or 49 basis points over MGS and six basis points inside secondary levels for conventional MBS paper. Indicative levels for the 10-year notes was 49 to 59 basis points over Malaysian treasury paper, pricing at 52 basis points over government paper, or 4.71%, and 36 basis points inside of secondary levels for its equivalent in the previous deal.

Cagamas also stretched its yield curve by including 12- and 15-year tranches. The 12-year notes carry a 5.01% coupon, 68 basis points over MGS, while the 15-year bonds pay 5.27%, a spread of 73 basis points.

A well-placed source said 70 Malaysian investors bought into the deal, with 11 accounts from Hong Kong and Singapore.

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