According to market sources, Indonesia's PT Federal International Finance (FIF) is planning a return to the ABS market after a nine-year hiatus. ABN Amro is tipped to have secured the mandate for a cross-border motorcycle loans offering, although the bank declined to offer confirmation of its involvement.

FIF, the biggest motorcycle finance provider in Indonesia, is a subsidiary of one of Indonesia's major business groups, PT Astra International (Astra). Both were active issuers in 1996 and 1997, when Indonesia was a hub for securitization activity until the Asian financial crisis hit. Astra actually completed the first Indonesian securitization in August 1996, a $200 million auto loan ABS arranged by Barclays Capital.

Astra is 50.11% owned by the Jardine Matheson Group - the Asian-based conglomerate that has strategic holdings in some of the region's biggest companies. The Jardine association with FIF's transaction - however indirect - will be a strong selling point, bankers say.

"Indonesia can be a tough sell given a lack of confidence in the legal system," one banker said. "That is mitigated by Jardine's involvement in FIF through its Astra Holding. Jardine has an excellent reputation and would not want this to be affected, which will comfort investors."

One potential stumbling block to a cross-border deal could be Indonesia's sovereign rating of BB-', below investment grade. However, bankers anticipate ABN to replicate the template set by Merrill Lynch when it arranged the $600 million Indocoal Exports future flow deal for PT Bumi Resources in June 2005 (ASR, 06/27/05).

In order to satisfy investor concerns about the Indonesian legal process and Bumi - which has a less-than-stellar reputation internationally - the deal was structured with several safeguards. These included ensuring transferring payments for coal exports directly from buyers to New York bank accounts. Daily monitoring of the accounts was enforced, with Bumi's rights to excess cash flows conditional on meeting strict covenants.

Those enhancements were enough to convince Fitch Ratings to assign BBB-' ratings, making it the first investment grade deal of any type from Indonesia since 1997.

Assuming FIF can also pierce the sovereign ceiling and attain competitive pricing, it may be followed to market by Astra, which has interests in automobile manufacturing and distribution, financial services, heavy equipment, agriculture, information technology and infrastructure.

As for ABN Amro, the FIF mandate was a welcome fillip following the postponement of Cambridge Industrial Trust's S$350 million ($219.2 million) initial public offering in Singapore. With equity markets weakening in recent weeks adding to fears of interest rate hikes - lessening the appeal of Cambridge REIT's 6.5% forecasted yields - the IPO has been put on hold for the time being.

ABN Amro provided Cambridge with a bridge loan to finance the acquisition of industrial properties sold to the REIT. It was widely anticipated a CMBS would be launched to refinance the loan as soon as the IPO was completed, with ABN strongly rumored to have the mandate.

Hsinchu's cross-border deal

Elsewhere, Taiwan's Hsinchu International Bank is planning a return to the cross-border market. Sources say Hsinchu has appointed Calyon Securities to arrange a residential mortgage-backed transaction.

Calyon was sole lead and swap provider on Hsinchu's debut last December, a 255 million ($320.6 million) deal that was Taiwan's first cross-border RMBS.

Although Calyon is keeping tight-lipped on the details, reliable sources suggest Hsinchu will do a bigger deal the second time around, with launch expected in September or October. The borrower will likely bring Ambac on board to ensure triple-A ratings and tighter pricing. The monoline fulfilled the role on Hsinchu's previous issue, which paid 17 basis points over Euribor for a 3.5-year average life (ASR, 12/19/05).

Chinese toll road

Meanwhile, Shanghai Pudong Road & Bridge Construction has gained approval from the China Securities Regulatory Commission for a RMB425 million ($53.1 million) transaction backed by toll road receivables. Guotai Junan Securities is arranging the deal that, as with other corporate ABS deals in China, will use the Customer Asset Management Plan structure.

The three-tranche issue, which has a maturity of four years and coupons ranging from 3.6% to 4.2%, will shortly be listed on the Shanghai Stock Exchange.

It will be the second toll-receivables securitization in China following last December's RMB580 million offering from Dongguan Development Holdings, which was listed in Shenzhen Stock Exchange (ASR, 01/9/06).

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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