Securitization remained a viable funding avenue for corporates and non-bank financial institutions in 2016, with China capturing a lot of the attention because of the rapid development of its onshore market. As Beijing looks for alternative sources to ease lending to companies in the wake of a slowing economy, new rules were laid out to enable the auto companies and other borrowers to raise financing through asset-backed securities (ABS). Cross-border activity was subdued as local currency was the preferred route to access the market.
With the growing China market providing more opportunities to arrange deals, five banks have laid out their credentials as the Best Securitization House. BNP Paribas made a breakthrough into the China securitization market in 2016, following its appointment as a syndicate member in the 3 billion renminbi auto loan ABS for Ford Automotive Finance (China). It got a repeat mandate from the company for its next deal in August, and was likewise a syndicate member in the 3 billion renminbi auto loan ABS for Dongfeng Nissan Auto Finance Company.
BNP Paribas contributed to market innovation as it helped arrange the first yen-denominated unwrapped ticket receivables deal in Asia for Korean Air Lines (KAL), amounting to 15 billion yen. It was a joint bookrunner in the first ever euro-denominated covered bond issuance out of Asia, for United Overseas Bank (UOB) of Singapore amounting to 500 million euro.
Citi also made its presence felt in the China securitization market with auto loan ABS deals for Ford Automotive Finance (China), BMW Automotive Finance (China) Company, and Dongfeng Peugeot Citroen Auto Finance Company, in which it acted as a financial adviser. In Korea, the bank arranged the first ever domestic ABS issuance by an international captive auto financier in this market for BMW Financial Services Korea Company for 300 million won. It was a joint bookrunner in the US$500 million covered bond for Korea Housing Finance Corporation (KHFC), which generated sufficient demand from the market.
In another transaction, Citi was a joint global coordinator in the US$500 million green covered bond for Bank of China (BoC), which represented the first international green covered bond offering from a Chinese issuer. It innovatively achieved double layers of green – the green use of proceeds of the bond and the green pledged asset pool.
HSBC is another bank that captured the key themes in the securitization market in 2016, with participation in such Chinese auto loan ABS deals for Volkswagen Finance (China) Company, Mercedes-Benz Auto Finance, Ford Automotive Finance (China), and Dongfeng Nissan Auto Finance Company, in which it acted as financial adviser and joint underwriter. It was the sole financial adviser and sub-underwriter in the 3.8 billion yuan residential mortgage-backed securitization by Postal Savings Bank of China.
The bank was also involved in two landmark covered bond deals – acting as joint lead manager for the 500 million euro offering for UOB and as joint global coordinator in the BoC green covered bond. Elsewhere, HSBC established a new securitization programme for Courts Singapore, with attractive funding costs and additional sources of liquidity to complement the Singapore dollar unsecured bond.
MUFG described 2016 as a fruitful year for its securitization team, having arranged deals in Korea, Malaysia, China, and Thailand. It was a joint lead arranger in the first cross-border commercial auto loan ABS by Hyundai Commercial, amounting to US$250 million – introducing in the process a new asset class into the market. It was also involved in the securitization of credit card receivables for Shinhan Card and Samsung Card, and in the auto loan ABS for Hyundai Capital.
In Malaysia, MUFG structured the first Shariah-compliant auto loan securitization amounting to 900 million ringgit, creating a new asset class for Islamic finance investors. In Thailand, it established its first auto loan securitization facility working with a domestic bank arranger, and acted as a joint lead underwriter for its first domestic auto loan securitization in China.
Another market leader in the securitization market in Asia is Standard Chartered, which completed 20 transactions in 2016, with nearly US$4 billion worth of assets securitized in the region. It has an extensive span of activities in key markets, including China, Korea, Hong Kong, India, and Singapore. It closed three loan repackage note transactions for financial leasing and securities companies during the year amounting up to US$970 million.
Acting as a joint global coordinator and lead manager, the bank also completed an issuance of US$694.2 million fixed rate secured notes backed by Chinese local government bonds. This is a groundbreaking Chinese bond repackaging platform that provides international investors access to China’s domestic government bonds.
In the auto loan financing ABS market in China, Standard Chartered was involved in deals for Beijing Hyundai Auto Finance Company and Ford Automotive Finance (China). In Korea, it continued to secure mandates for aircraft-related financing for Asiana Airlines and KAL, and in covered bond business for KHFC.
The winner of the Triple A Best Securitization House will be revealed on February 28 2017 during The Asset’s Regional House & Deal Awards Dinner. For more information about the awards ceremony, please click here.
