Now that the worst of Asia's financial crisis has passed, the International Finance Corp. (IFC), the private lending arm of the World Bank, is looking to help asset-backed originators in the region get their transactions off the ground.
"After the crisis, the need for the IFC is much greater than before. Lenders have pulled back and investors are still reluctant. But we believe that the Asian markets are ready for this type of instrument, which we'll be offering along with other traditional products," commented Arun Sharma, head of structured finance at the IFC in Washington, D.C. No transactions with IFC backing have yet emerged from Asia, although Sharma said he is working on some deals in the region.
The IFC is now looking to support securitizations of receivables, in addition to the single-asset securitizations it has backed before in Latin America. "We continue to do single asset deals, in which a corporate loan is sold as participations to insurance companies in the form of securities. But in Asia and elsewhere, we are now also looking at securitization of financial assets. That's a big difference between what we've done before and what we are looking to do now." Assets such as corporate and auto loans, leases, mortgages and trade receivables would be considered, as would future flow deals "so long as they are for private sector companies raising long-term funds."
IFC support for Asian ABS may take various forms, such as investing in senior or mezzanine pieces, providing interest rate or currency swaps, performing due diligence, and advising on securitization laws. The IFC's preferred creditor status also helps structured deals attain higher ratings by mitigating transfer and convertibility risk, said Sharma.
Sharma declined to discuss specific deals, but at least two Korean banks are hoping to get the IFC's blessing. LG Merchant Bank has been trying to complete a $400 million CLO, and though the IFC has agreed to buy 25% of the senior piece, arranger Chase Securities has yet to find enough investors, said an LG official.
On a brighter note, Korea French Banking Corp.'s plan to raise $180 million in lease-backed securities via SG Asia is still on track. The IFC has already agreed to buy 25% of the senior portion of the deal, which is now awaiting ratings from Moody's and Standard & Poor's and should be launched in the next two months, said a bank official. VC