Two commercial mortgage-backed offerings out of Singapore were set to price as of press time. CapitaCommercial Trust (CCT) and CapitaMall Trust (CMT) - the real estate investment trusts managed by Singaporean property developer and the city-state's most active securitizer, CapitaLand - will jointly issue a S$866 million ($552.6 million) multi-currency deal to part-finance the S$2.2 billion acquisition of the Raffles City Complex.
Simultaneously, Frasers Centrepoint (FCL) will sell a S$260 million CMBS to refinance a term loan used to fund the purchase of three local shopping malls.
CCT and CMT hired HSBC to arrange their transaction, which will see ownership of Raffles City transferred to a special purpose trust, RCS Trust. European roadshows were wrapped up last week, after the sellers earlier met with investors in Hong Kong and Singapore.
The sale of bonds via the Singapore-domiciled Silver Oak special purpose vehicle will refinance a bridge loan, with CCT responsible for 60% and CMT the remainder.
Located in Central Singapore, Raffles City consists of a shopping mall, office tower, convention center and two hotels. Over a three-year period, the average occupancy for the office space is 90%, while the retail take-up is an even more impressive 99.3%. According to Fitch Ratings, the stressed debt service coverage ratio for the notes is 1.6 times.
Depending on demand, CMT and CCT will sell S$670 million-equivalent of notes - rated triple-A by Fitch, Moody's Investors Service and Standard & Poor's - in either euros or U.S. dollars. Additionally, the deal will feature a 60 million tranche ($76.9 million) -also rated triple-A - and a S$136 million domestic piece, rated AAA'/'Aa2' by Fitch and Moody's.
All three tranches have an expected maturity of five-years and legal final of seven years. Although indicative pricing details have not been made available, most observers would view a spread in the midteens as a par result, given the quality of the underlying assets and the ties to CapitaLand, a sought after credit in Asia and Europe.
FCL, meanwhile, appointed Standard Chartered to handle its deal, which will be sold via the Star Topaz SPV. The single-tranche offering will be collateralized by rental income on three retail properties.
As with the Raffles City transaction, FCL's offering is highlighted by excellent occupancy rates in the underlying properties. With each located near underground train and bus stations, all the malls have enjoyed above 98% take-up in the past three years.
According to Moody's, the LTV over the properties is 35%, while the stressed DSCR is 2.41 times. The agency estimates over the course of the transaction the aggregate value of the properties to be S$743 million.
Both Moody's and Fitch assigned triple-A ratings to the notes, which have a five-year bullet maturity. Price guidance of 20 basis points over SIBOR has been released by the lead manager.
Elsewhere, Taiwan's Hsinchu International Bank last week began roadshows for its second cross-border residential mortgage-backed offering. As with its debut last December (ASR, 01/09/06), Calyon Securities is on board as lead manager.
In fact, the two transactions are almost identical. The latest issue - like the first - is sized at 255 million ($327.3 million) and will be sold via the Hsinchu International Mortgage special purpose vehicle. Ambac Assurance will again provide an unconditional guaranty, enabling triple-A ratings from Moody's and Standard & Poor's.
The deal is backed by 5,217 mortgages with an outstanding principal of NT$15.3 billion ($466.9 million), weighted average loan-to-value of 79.22% and seasoning of 5.5 months. S&P rated the notes AA-'on a standalone basis, which are structured to pay a step-up coupon should they not be fully redeemed in six years.
When Hsinschu completes the deal, it will become only the second repeat RMBS cross-border issuer in the ex-Japan Asia region. It will hope to emulate the success of the other - Korea's Standard Chartered First Bank - which has recorded the tightest spread levels by an Asian issuer in the public cross-border market.
Hsinchu's debut achieved pricing of 17 basis points over Euribor on a 3.5-year average life, and placed with investors in Asia and Europe.
Meanwhile, Korea's biggest air carrier, Korea Air Lines (KAL), recently sent out request for proposals for what will be its third international securitization. As with its two predecessors, the transaction will be backed by cargo and ticket revenues on its Korea-Japan routes.
According to sources familiar with the RFP, KAL will mainly look to tap Japanese investors looking for spread and will be sized at 40 billion ($345.6 million). Four banks have been short-listed to arrange the deal: Calyon, Citigroup Global Markets, HSBC and Nomura Securities.
Nomura structured KAL's debut 27 billion offering in September 2003, while Citigroup was sole lead on March 2005's 20 billion follow-up. That deal priced at 40 basis points over Libor over a 1.6-year average life. The bonds benefited from a credit-facility provided by Korea Development Bank, a quasi-sovereign agency, and were consequently rated at the single-A level (ASR, 04/04/05).
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