The long-awaited second securitization from China's largest shipping concern, China Ocean Shipping (Group) Company (Cosco), has been thwarted once more.

The shipping receivables-backed transaction was recently revived after MBIA-Ambac International agreed to wrap it, making it possible for the deal to be funded into a U.S. commercial paper conduit (ASRI 6/28/99, p1). But last-minute insurance problems have caused the transaction to be shelved again, said sources in Hong Kong. MBIA and Cosco officials declined to comment.

Failure to launch the deal is a setback for Cosco, which originally mandated the transaction to Chase Manhattan in 1997. The firm's first securitization - a $300 million shipping receivables-backed transaction in 1997 - was downgraded by Moody's from Baa2 to Baa3, one notch above speculative grade, in March.

However, developments since the insurance problem materialized are likely to make it even harder for the deal to proceed, said sources. Chief among them is Standard & Poor's downgrade of China's long-term foreign currency sovereign and senior unsecured ratings to triple-B from triple-B plus last month.

The sovereign downgrade, which triggered the downgrade of seven other government-backed financial institutions, caused spreads on Chinese bonds to widen. Another factor heightening China risk has been renewed political tensions with Taiwan, added one source.

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