Jih Sun International Bank, the commercial banking unit of Taiwan's Jih Sun Financial Holding Company, last week completed its debut cross-border deal. HypoVereinsbank (HVB) arranged the $118 million auto loan-backed transaction - only the second international issue so far from Taiwan - with Deutsche Bank acting as trustee.
The transaction - rated Aa3'/'AA-' by Moody's Investor's Service and Standard & Poor's and issued out of the JSB Taiwan Auto One SPV - set a new benchmark for Taiwanese deals. Final pricing of 60 basis points over one-month Libor was 33 points inside the previous Taiwanese cross-border issue, last December's $230 million credit card offering from Cosmos Bank.
HVB, along with UBS, put together the Cosmos transaction and its bankers acknowledge the market environment is altogether more favorable now than it was nine months ago. For one thing, Cosmos's deal was issued at a time of severe political tension between Taiwan and China, which made it a tough sell to some offshore buyers.
Although the strained relationship between China and Taiwan continues, the waters are calmer now, contributing to spread contraction. A source said auto loans are a better performing asset than credit cards, which also helped pricing.
The deal was fully subscribed at launch. Interestingly, all the bonds were placed outside Taiwan. The source said the main interest came from Europe, particularly the U.K., Germany, Switzerland, Austria and Ireland with additional participation from the U.S. and Japan.
A small amount investors had also bought into the Cosmos issue, but most were new to Taiwan. Interest came from banks, fund managers and insurance companies.
HVB is believed to be working on more deals in Taiwan, which, along with Singapore, is proving profitable for the firm. As is Japan, where the bank recently closed a 12 billion ($108.2 million) consumer loans deal for A-Plus.
Meanwhile, Jih Sun surprised almost everyone by completing what is thought to be the first local currency synthetic CDO in Taiwan, just prior to its international debut.
As with most other Asian CDOs, pricing details were not disclosed. What is known is that Deutsche Bank Securities structured a three-year bullet deal referenced to an investment grade pool of 100 credits worth $2.36 billion. Two-thirds of the cash part of the transaction was issued in New Taiwan dollars, with the remainder in U.S. dollars.
It is believed Jih Sun bought the entire deal and intends selling portions on to wealthy individual clients.
In Japan, Mizuho Securities and government agency Japan Finance Corporation for Small Business are joining forces for a collateralized loan obligation program for small-to-medium sized enterprises (SMEs).
The pair plan to offer SMEs five-year loans with fixed, 3%, rates, which will be partially be guaranteed by Japan Finance Corp., the first time the agency had provided such a service. Mizuho will begin seeking applications for loans in October, before commencing lending in December.
To qualify, companies must generate a minimum of 300 million ($2.7 million) in annual sales and be in net-profit at the time of application. The maximum loan amount per borrower will be 100 million.
Mizuho expects the scheme to total 30 billion, around which point it will package the loans into a CLO and target institutional buyers.
Staying in Japan, two prominent nursing home specialists are planning securitization deals to finance the construction of more homes. An ageing population has led to increased demand for nursing home facilities, particularly in big cities.
Comsn Co., Japan's second largest nursing home company and a subsidiary of the Goodwill Group, plans by January to sell to an SPC two sites where it plans to build condominiums. Nikko Citigroup will lead the sale, which will help Comsn raise 23 billion for construction of the project, due for completion in 2006.
Securitization, as opposed to bank loans, will lower the capital outlays of Goodwill, in the process boosting projected 2005 net profit to 2.8 billion from 2.1 billion. Comsn says it will utilize the SPC for future projects.
Rival firm Total Care Support is thinking along the same lines. Early next month, Total Care will sell one of its homes in Funabashi, Chiba Prefecture, to an SPC to purchase sites for new homes.
Shifting asset classes, Goodloan Company - the Tokyo-based spinoff of Finance All Corp. - has mandated Deutsche Bank to manage its RMBS deal. Goodloan will use securitization to finance origination growth for its fixed-rate products.
The company offers 10- to 35-year loans and, with interest rates rising, expects strong demand for long-term fixed-rate loans from new buyers and refinancing. Since Goodwill began operating in 2001, the company has generated 40 billion in outstanding loans, but expects the new products to generate 50 billion in the next year.
Securitization looks set to play a major role in efforts to clean up the balance sheet of Japanese property conglomerate Daikyo Inc, which has estimated debts of 490 billion.
One of Daikyo's major creditors, UFJ Bank, has applied to the state-run Industrial Revitalization Corp. of Japan to take on around 310 billion of the debt. The bank has come up with a twin plan of securitization and encouraging loan forgiveness' from lenders for the remaining 180 billion.
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