This year is comfortably turning out to be the most robust year for Malaysian securitization since the Securities Commission introduced ABS guidelines in 2001. And while overall volumes remain small compared to more established Asian markets, there is enough evidence to suggest the recent surge in activity will continue, with three deals set for completion in the coming weeks.
The most sizeable offering will be a M$1 billion ($265.3 million) primary CLO issued out of the CapOne Bhd SPV. Malaysian International Merchant Bankers is arranging the deal, supported by joint lead managers Amanah Short Managers and Avenue Securities.
Nomura Securities acted as technical advisor on the deal, fulfilling the role it played on two previous M$1 billion Malaysian CLOs; working with Affin Bank in November 2002 for the Aegis One transaction, and Alliance Merchant Bank on last May's Kerisma issue (see ASR 5/31/04).
A signing ceremony for CapOne was held in Kuala Lumpur on Friday, and a source familiar with the situation expected the deal to close in the next week. As was the case with its two predecessors, the underlying collateral consists of new loans made to a diversified group of 25 investment-grade Malaysian corporations.
The major difference with the new deal is the inclusion of a M$600 million five-year super-senior tranche, rated AAA' by Malaysia Rating Corp., featuring a 40% subordination level. According to the source: "This gives investors a much wider choice in terms of risk versus return, and further evolves the CLO product in Malaysia."
Two additional five-year tranches are also featured a M$250 million triple-A senior piece, plus the M$50 million mezzanine tranche. The coupon for the super senior piece is fixed at 5.40%, the senior notes pay 5.80% - matching the Kerisma deal - while the mezzanine notes offer a 7% coupon. All tranches offer a particularly healthy pick-up over the five-year government benchmark, currently trading around the 3.30% mark.
Against more comparable issues, such as the five-year paper on Cagamas' MBS debut trading at 4.22%, the pick-up still looks appetizing on the super senior piece. Meanwhile, the most recent secondary activity on the Kerisma CLO, maturing in 2009, saw senior notes trading at 5.67%
Accordingly, the source says the deal is attracting plenty of attention. "Investor response has been very positive thus far, and the biggest investors will be banks, asset managers, insurance companies with a few larger corporates also participating."
According to local reports, once CapOne closes, Nomura will begin work on another Malaysian CLO. As the bank does not currently hold a domestic dealers licence in Malaysia, its role will again be limited to an advisory one.
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