India's Housing and Urban Development Corp. (Hudco) has finally mandated advisers for its debut securitization, a deal that has so far been nearly a year in the making. Hudco appointed Citibank as lead adviser and ABN Amro JM Morgan Stanley as co-adviser, along with a consortium of domestic securities firms to distribute the securities.
Based in New Delhi, Hudco provides financing for urban development and other infrastructure projects.
The Rs10 billion ($316.3 million) transaction will be split into two equal tranches, with Citibank and ABN Amro JM Morgan Stanley only structuring the first tranche, said a Citibank official.
The assets are receivables from infrastructure projects including water, road and urban development projects located throughout India. Given the long-term nature of the assets, the securities will also be long-dated and range from five to 10 years. Launch date is set for the beginning of April.
Domestic rating agencies Crisil and Icra will likely rate the issue, which will be domestically placed, the official added.
The deal is noteworthy not only for its relatively large size, but also because it is the Indian government's first foray into the nascent securitization market. "Hudco is a government financial institution and this is the first time that a government institution is going to market with a securitization," explained the Citi official.
It will also be the first collateralized loan obligation involving infrastructure assets from India. Until now, most securitizations have been backed by auto loans and equipment leases, added D. Thyagarajan, head of securitization ratings at Crisil.
India put another stamp of approval on securitization when its financial regulator, the Securities Exchange Board of India (SEBI), allowed the Industrial Credit and Investment Corp. of India (ICICI) to market the first mutual fund dedicated to investing in domestic ABS.
The fund will pool a basket of securitized assets comprising ICICI's own receivables and those of other originators and will be sold in units to domestic institutional investors. ICICI will begin marketing the fund in the coming weeks.
The market will be further boosted when SEBI allows Indian mutual funds to invest in mortgage-backed securities, providing a boon to housing developers and allowing them to improve their asset-liability management, noted Ananda Bhoumik, head of Duff & Phelps Credit Rating India.