Industrial Bank of China has closed its Rmb820 million (US$99 million) securitization of non-performing loans. Credit Suisse First Boston arranged the deal, backed by an asset pool with a face value of Rmb2.6 billion, while Citic Securities led the sale of trust certificates to investors.

The deal offered a Rmb200 million piece with a one-year average life, and a Rmb400 million subordinated piece with expected average life of under three years. Both were rated triple-A by local agencies. In addition, the deal was structured with a Rmb220 million first-loss tranche, to be retained by ICBC.

The one-year certificates offer investors a 5.01% coupon, while the sub-piece priced at 5.10%. Although banks, insurance companies and investment funds are not permitted to invest in NPL-related securities, the deal was fully subscribed with interest coming from non-bank financial institutions.

"The ICBC deal sets a blueprint for similar transactions," says Larry Sperling, head of CSFB's Asia-Pacific strategic transactions group. "We believe this is the first true NPL securitization in China because it uses concepts common in international transactions - it is rated, has a tranche structure and is compliant with the laws in China."

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