Citigroup Global Markets last week launched its first asset-backed deal collateralized by trade finance receivables from what could be an ongoing program. The bank is self-arranging the $198.9 million transaction, issued out of the Ireland-domiciled ABS Global Finance SPV.
The debut 144A issue from the facility is backed by trade finance loans originated by Citigroup branches in Hong Kong, Singapore and Taiwan. According to sources, if the first deal is a success, the bank is likely to add new assets from additional countries to the program.
Citigroup embarked on roadshows in New York and Boston last week and will meet with investors this week in London and Hong Kong. Pricing is expected in the last week of November.
The structure involves Citigroup branches selling trade loans to local SPVs or trusts in the three jurisdictions, which will then sell local notes/ trust certificates to an offshore trust. That trust will issue investor certificates to the Irish SPV plus a subordinate certificate to be retained by Citigroup. The SPV will then sell bonds collateralized by the performance of the loans to institutional investors.
Credit enhancement for the senior notes comes chiefly through subordination, a default loss reserve and excess spread.
The pool consists of U.S. dollar-denominated loans used by customers for import and export purposes from Citigroup's GTS Trade Services and Finance business. The tenors of the loans range from seven days to 180 days, with the average maturity in the 40 to 60 day range
Hong Kong receivables account for 54.2% of the pool; Taiwan 32.8% and Singapore 13%. They were extended to customers from a range of industries, including information technology, apparel and chemicals.
Citigroup will sell five rated tranches with expected maturities of two years and a legal final of four years. Fitch Ratings and Standard & Poor's assigned triple-A ratings to the $186 million senior notes, with the subordinated tranches rated between single-A and single-B. An unrated $1.1 million equity piece has also been structured into the deal.
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