The news that China's second-largest mobile-phone service provider, China United Telecommunications, was set to issue Rmb3.2 billion ($395.5 million) of short-term ABS seemingly came out of nowhere. In fact, when asked their thoughts on the deal, put together by China International Capital Corp, most Asian securitization bankers questioned whether it actually existed (see ASR 8/22/05).

With the focus fixed on the upcoming MBS from China Construction Bank and infrastructure loans ABS by China Development Bank, few expected a third issuer would tap the market this year. But that is exactly what China Unicom has done, even though its deal is more akin to a conduit facility than a term ABS transaction. Unicom will use the proceeds to help reduce the construction costs of expanding its network.

Since the last report, six-month and one-year trust certificates were sold to around 20 investors, including corporate buyers, pension funds and financial institutions. The Shanghai Stock Exchange then announced it would allow limited (an extra 30 minutes daily) after-hours trading of the certificates among approved buy-and-hold institutional investors.

Details on ratings and historical performance data have not yet been made public, although it appears the deal will be backed by revenues generated by Unicom leasing its mobile network to its Hong Kong-based subsidiary.

Bank of China is backing the certificates, comprising of six-month paper paying 2.55% and one-year notes offering a 2.8% coupon. That is roughly 80 basis points over bank issued commercial paper, but significantly less than the 5% one-year loan rate charged by commercial banks.

It remains a mystery how this story remained secret until the moment Unicom was ready to launch. However, it seems Unicom benefited from far simpler regulatory procedures, and was consequently able to get the deal structured relatively quickly. The company needed approval only from the China Securities Regulatory Commission, making it a far more straightforward exercise than the estimated 10 regulatory bodies both the Construction and Development banks have had to satisfy.

Even so, recent news on both those transactions seems to be positive. A source close to the Rmb10 billion China Construction Bank deal, arranged by Standard Chartered, was confident of a late-third to early-fourth quarter launch. China Development, working with Lehman Brothers, is targeting an early October launch for its Rmb5 billion deal. Should all go as planned with the first offering, an additional Rmb5 billion would then be issued before the end of the year.

Elsewhere, the latest Singaporean REIT to tap Euro CMBS investors was set to open books on a 190 million ($236 million) issue late last week. Prime Real Estate Investment Trust, which was only established in August by German insurers Ergo, appointed HSBC and Standard Chartered as joint lead managers on the transaction - issued out of the Orion Prime SPV.

Roadshows were held in Hong Kong, Singapore, London, Dublin, Frankfurt and Paris. The single-tranche deal comprises 190 million of floating rate notes, rated triple-A by Fitch Ratings and Moody's Investors Service, with five-year expected lives and a 6.5-year legal final maturity.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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