The Hong Kong Mortgage Corp. (HKMC) is preparing to issue two residential mortgage-backed securitizations, achieving a key mission set at its inception two years ago.
This week, the HKMC will launch HK$1 billion (US$129 million) of securities backed by mortgages purchased from Dao Heng Bank. In December, it will launch a second MBS of HK$700 million backed by mortgages purchased from American Express Bank.
Neither issue is rated, as they are denominated in local currency and come with a HKMC guarantee against credit risk, said Pamela Lamoreaux, chief operating officer for HKMC. Both transactions will be issued by an SPC called HKMC Funding Corp. No. 1 and comprise five-year bonds to be priced at Hibor minus 110 basis points.
Both Dao Heng and American Express are expected to buy back the securitized bonds. "The documentation allows them to trade the bonds to professional investors under some selling restrictions. But it's up to them to decide if they want to sell them or hold them on their own portfolio," said Lamoreaux, though she added that the HKMC would like to see the bonds actively traded.
A third MBS with another bank is in the works, but the size and launch date has yet to be determined, she said. This year, the HKMC aims to issue roughly HK$2 billion, and HK$3-5 billion in the year 2000.