Malaysia's RCE Capital last week confirmed its intention to raise between M$1 billion ($271.2 million) and M$1.5 billion through securitization. The consumer finance company, which specializes in providing loans to civil servants, wants to use the proceeds to boost loan origination and increase market share.
At the end of July, RCE's loan book amounted to M$750 million. With over 1.2 million Malaysian civil service workers, there is clearly significant room for growth.
A first deal from the program has been tentatively penciled in for the first quarter of 2007. No official announcement has yet been made on an arranger. However, as RCE is a subsidiary of AmBank, one of Malaysia's biggest diversified financial groups, it would seem a certainty that AmMerchant Bank - the investment banking arm of AmBank -will be involved.
Shelving plans
RCE recently shelved plans for a medium-term note program to issue straight debt. RCE's stand-alone credit rating is single-A, but analysts believe it could achieve triple-A ratings on a securitized deal structured with additional credit enhancement. Investors may view favorably the fact loan repayment by civil service workers is deducted directly from salaries.
It has been estimated an ABS program could result in savings of between 200 and 300 basis points on RCE's current cost of funds. It may also allow RCE to stretch its yield curve beyond five years.
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