Cagamas, Malaysia's state-controlled secondary mortgage agency and benchmark RMBS issuer, is looking to tap securitization investors again with an M$2 billion ($541.4 million) offering in the fourth quarter.

No banks have yet been approached by the agency to arrange the deal. However, it is probable Cagamas will follow the template of its three previous transactions by selecting a local bank for the domestic sale, while bringing on board a foreign house to source offshore investor interest.

Having advised on Cagamas's prior transactions, Commerce International Merchant Bankers and Aseambankers would be strong candidates to head the local underwriting effort. Citigroup, Deutsche Bank, HSBC and Standard Chartered would be among the top contenders for the foreign lead manager role.

It has not been decided whether Cagamas will select the conventional RMBS route - used for the first and third deals in October 2004 (ASR, 10/18/04) and December 2005 (ASR, 12/12/05) - or do a repeat of the Islamic structure from July 2005 (ASR, 08/01/05). All three issues were backed by mortgages extended to civil servants.

Whatever it chooses, market watchers will expect another blowout success. The agency has to date sold M$5.25 of mortgage-backed paper and all three deals were several times oversubscribed, despite pricing reasonably tight to Malaysian Government Securities.

Cagamas plans to raise at least an additional M$20 million over the next four years to fund new loan origination. The government is keen for all departments to raise funds independently rather than rely on state handouts.

While the prospect of future RMBS issuance from Cagamas looks good, there is still no positive news on the two synthetic CLOs it is involved on. Cagamas selected two consortia in June 2005 - Citigroup and Aseambankers and Deutsche and Overseas Chinese Banking Corp. - to structure deals backed by SME loans.

Cagamas' role involves paying arranging fees and purchasing the subordinated equity tranches. The Citigroup-Aseambankers deal has been ready for several months. However, market whispers suggest Cagamas is unwilling to allow launch in the current market environment, fearful pricing would be significantly wider than its RMBS offerings (ASR, 06/12/06). Rival bankers now question whether either deal will see the light of day.

RCE's ABS plans

Staying in Malaysia, market whispers suggest RCE Capital wants to tap the securitization market. RCE, a subsidiary of the financial services group Arab-Malaysian Corp., specializes in providing personal loans to civil servants.

The company's loan book grew by over 100% in the 2005/2006 financial year to M$570 million. However, analysts reckon there is plenty of room for growth. RCE has only 29,000 accounts on its books, while there are over 1.2 million civil service workers in Malaysia.

To date, RCE has predominantly raised funds through straight bonds. ABS bankers feel the company is ripe for securitization, particularly as loan repayment by RCE's obligors is deducted straight from salaries, which would make transfer to a special purpose vehicle straightforward.

Bankers believe that with sufficient credit enhancement, RCE could structure deals to secure triple-A ratings, above the single-A level the borrower achieves on a stand-alone basis. Higher ratings would result in tighter pricing, while enabling RCE to stretch its maturity curve beyond five years.

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

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