Hong Kong Mortgage Corp. (HKMC), the government-controlled secondary mortgage agency, will launch on Oct.19 the third deal out of the Bauhinia special purpose vehicle. HSBC is arranging the HK$2 billion ($256 million) issue, and will act as sole underwriter for the institutional tranches, with Standard Chartered brought in as joint-lead for the sale to retail investors.

This marks the first time HKMC has offered MBS paper to retail buyers, but was inevitable following successful offerings of its straight debt deals and the Hong Kong government's blowout HK$6 billion tunnels-backed securitization in May (see ASR, 5/10/04).

Retail investors will be able to buy three fixed-rate tranches with likely average tenors of one, three and four years, according to a banker familiar with the transaction. Institutional buyers will be offered fixed and floating rate paper, with the maturity not yet confirmed. Some international institutional participation is expected as a result of offshore interest in the tunnels deal.

The banker added that Standard & Poor's and Moody's Investor's Service would respectively rate all tranches at the sovereign ceiling of AA'/'Aa3'. He believes the retail/institutional split will be around 50/50.

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