After many months of delay, China's first asset-backed originator could soon hit the market with its second securitization, according to sources close to the deal. China Ocean Shipping (Group) Company (COSCO), the country's largest shipping firm, is preparing to launch a transaction backed by shipping receivables from European customers.

The deal looks set to be funded into a U.S. commercial paper conduit, after being revived thanks to a wrap from triple-A rated monoline MBIA-AMBAC International. The total size is still unclear, but the original mandate, which was awarded to Chase Manhattan in November 1997, called for a $500 million issue.

The long gestation led many to believe that it had been shelved for good. "It's not dead. It's been restructured to give them the rating they wanted," commented one source.

COSCO's first securitization, a $300 million transaction backed by future shipping receivables from its North American operations, was downgraded in March by Moody's from Baa2 to Baa3 one notch above speculative grade. BankBoston arranged the deal, most of which was wrapped by CapMAC and placed in Bank of Tokyo-Mitsubishi's conduit, Banner Receivables Corp. At the time, Moody's cited COSCO's weakening financials and a belief that the global shipping industry was entering a downturn.

Revival of the COSCO deal is good news for the Asian asset-backed market, which has seen little activity outside Japan following the 1997 currency crisis. The fact that the deal has MBIA's backing and originates from China, whose securitization and bankruptcy laws are relatively undeveloped compared with those of other Asian countries, is "definitely a positive development for the market," commented one source.

If the deal is completed with the wrap, it will be the first time that one of the big U.S.-based monolines has taken on a non-Japan Asian deal since the asset-backed market in the region reached its lowest ebb in late 1997/early 1998. It will be greeted as a further sign that the Asian market is well on the road to recovery. Until now, monolines have been extremely wary of any Asian risks, largely because of doubts about how well the underlying collateral had stood up to the various economic shocks.

"Taken with the handful of Hong Kong deals that have been done this year, this is very positive. It is now a question of whether there is a demand for securitization from the region's banks and corporates, given how cheaply many companies can borrow in the local markets," said a banker involved with Asian ABS. - VC

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