After one of the most drawn-out mandate processes in Asian securitization history, Cagamas, Malaysia's state-run secondary mortgage agency, has finally selected arrangers for its planned Islamic MBS. HSBC beat off bids from Deutsche Bank Securities and Standard Chartered to secure the foreign advisory role, and will be supported by dominant local house Commerce International Merchant Bankers.

Cagamas originally invited proposals in November for the M$1.5 billion ($395 million) deal - potentially a first for the Malaysian market - and was due to make a decision late last year. However, according to bankers familiar with the mandate, the agency could not get comfortable with the proposed structure and called for the competing banks to submit new bids last month.

At the same time, Cagamas sent out RFPs to a number of banks for a deal backed by loans to small-to-medium sized entities. Bids were due earlier this month with HSBC, Deutsche Bank, StanChart and Nomura Securities among the foreign hopefuls. A decision is expected "soon," sources said, without stipulating whether they were going by Cagamas' definition of the word.

Cagamas completed its debut securitization in October, a M$1.6 billion MBS that attracted huge interest from local and foreign investors (see ASR 10/11/04). Boutique firm Bumiwerks Capital Management arranged the transaction, Aseambankers and Commerce International Merchant Bankers coordinated the domestic placement and StanChart handed the sale to offshore investors.

Elsewhere in Asia, Korea First Bank was set to launch late last week its fourth international MBS offering. Calyon Securities, Royal Bank of Scotland and Standard Chartered (which will soon close its $3.3 billion takeover of KFB) are joint lead managers on the 500 million ($671.1 million) deal.

Calyon and RBS, along with BNP Paribas, were involved in Korea First Bank's December 2004 offering. The 550 million transaction attracted massive interest from European buyers (see ASR 12/6/05), pricing at 21 basis points over Euribor for the 3.09-year deal - setting a new benchmark for Korean cross-border securitizations.

That deal is currently trading around 15 basis points over Euribor, and early indications suggest pricing for Korea First Bank's upcoming deal will be through its last one. It is reported that the three lead managers are hard underwriting the deal at 14 basis points, and looking to price inside that.

A banker involved declined to comment on potential spreads, but admitted the leads would likely tap into European interest in Asian paper in the future. "This should be a groundbreaker for Korean cross-border RMBS, further opening up the Euro as the currency of choice for issuers."

The latest deal is backed by a 13,483-loan pool with a current balance of W780.3 billion ($777.4 million). The loans have a 52.7% weighted average LTV and average seasoning of 10.45 months.

In terms of structure, little is different from Korea First Bank's two previous public offerings. At launch, Korea First Bank sells the mortgages to a Korean-registered SPC - First Home Loan No.4. The SPC then issues senior and junior purchaser notes. The latter is retained by Korea First Bank while an Ireland-incorporated SPV, called Korea First Mortgage No.4, buys the senior notes. The SPV then sells notes to investors, collateralised by the senior note.

The one significant difference between this and the previous offerings is the presence of financial guarantor MBIA as the monoline insurer. Ambac provided the third-party wrap on Korea First Bank's two earlier public deals. MBIA's guaranty secures the deal's triple-A ratings from Fitch Ratings and Moody's Investor's Service.

Staying in Korea, Woori Bank - a unit of the country's second largest financial services group, Woori Finance Holdings - is working with Merrill Lynch on an ABS project, sources close to the situation reported. Officials at Merrill Lynch declined to comment, but rival bankers speculated that non-performing mortgage loans or consumer loans could be involved.

Meanwhile, news emerged from Thailand last week that StandChart is arranging a THB4 billion ($104.1 million) auto-loan deal for Siam Industrial Credit Co., a consumer finance provider. StanChart is working with Siam Commercial Bank - Siam Industrial Credit's parent company - and expects to close the transaction in late April to early May.

REITs have provided excellent securitization opportunities in Singapore in the past few years. Now the Malaysian REIT market is ready to take off, according to research issued by Standard & Poor's last week.

With dividend yields of between 6% and 8% typical in other markets, the Malaysian Securities Commission recently issued guidelines for the establishment of REITs, which will be supported by tax breaks from the Government.

"Although the listed property trusts of the past had not made much headway onto the radar screen of investors, the path is clear for the REIT market to take off," said Winston Siay, a senior analyst at S&P. "A good REIT may not necessarily own the best assets, but they do enhance the property value. Most important is the management's proactive strategy in raising rentals, increasing occupancy as well as aggressive promotions.

The Commission gave approval earlier this month for the first Malaysian REIT - AXIS REIT - to list on the Bursa Malaysia stock exchange, while large property developers such as YTL Land are also looking to divest certain properties into REITs.

In Singapore, property trusts have issued CMBS transactions extensively to fund the acquisition of prime retail, rental and office developments.

Copyright 2005 Thomson Media Inc. All Rights Reserved.

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