More activity is shaping up from China's emerging securitization market, specifically from China Development Bank (CDB) and China Network Communications.
CDB will shortly launch its second ABS. The bank says it has secured interest for a RMB5.8 billion ($722.3 million) offering from 74 institutional investors, including commercial banks, credit cooperatives, insurance companies and brokerages.
Details were not disclosed on the asset pool or underwriting team, although it is likely infrastructure loans will collateralize the deal.
That was the case on CDB's debut, a RMB4.2 billion CLO completed last December (ASR, 01/09/06). The deal was one of two government-supported, pilot' securitization schemes.
China Construction Bank completed the other transaction, a RMB3.1 billion issue backed by residential mortgages. Local media reports suggest the two banks have signed a cooperation agreement to work on, among other projects, ABS initiatives.
Meanwhile, China Network, the state-owned telecommunications group, last week listed RMB10.3 billion of asset-backed securities on the Shanghai Stock Exchange. China International Capital Corp. (CICC) arranged the deal, backed by a pool of unspecified receivables.
The transaction was split into 10 tranches with maturities of between two months and 4.66 years and coupons ranging from 2.50% to 3.80%. Distribution details were not available as of press time.
The deal is the second telecoms ABS arranged by CICC. The bank also structured the RMB3.2 billion issue by China United Telecommunications last September, a bond that came out of nowhere (ASR, 09/12/05).
That transaction consisted of trust certificates with maturities of six months and 12 months, respectively, paying 2.55% and 2.8%. While around 80 basis points over bank-issued commercial paper, pricing was significantly under the 5% one-year loan rate charged by commercial banks, the main funding source for corporates.
Consequently, China Network's decision to follow Unicom's lead was not surprising. With the China Securities Regulatory Commission stating China's ABS market could top RMB200 billion in the next two years, bankers expect substantial corporate issuance to compliment offerings by financial institutions.
Motivated by the prospect of cheap funding and higher ratings, Huaneng Power International has already confirmed plans for a RMB15 billion program (ASR, 02/06/06). Two of its competitors, Datang International Power Generation and Huadian Power International, have also been linked to deals in recent weeks.
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