A-Reit brings second successful international securitization

Singaporean Reit prices at tight differential to international comps.

Ascendas Reit Estate Investment Trust (A-Reit) returned to the international commercial mortgage-backed securitization sector yesterday (Tuesday) with an Eu165 million seven-year deal via BNP Paribas. The triple-A rated transaction was priced at the mid-point of its marketed range of 22bp to 24bp over Euribor.

At 23bp, the deal came 7bp wider than retail mall operator Suntec City's Eu320 million deal in March. That deal, issued via SPV Platinum AC1 had a shorter five-year maturity and aggressive launch spread of 16bp over Euribor.

Going into the deal, A-Reit would have been challenged to achieve a similar pricing differential in markets, which have notably weakened since then. "In the last month AAA spreads for all asset classes in Euro have widened by about 6bp," says a representative of the arranger, "so pricing was in-line with our expectations."

Indeed, A-Reit's spread represents a slim 3bp premium over a similarly rated Society General CMBS - a six-year ST400 million offer via SPV White Tower 2005-1 Plc.

This means A-Reit has managed to maintain the spread differential between Asian and European credits. When it first came to market last July it priced at a 10bp premium. By March, however, Suntec had been able to narrow this to 2bp and A-Reit has now come at a similar level taking into account the one-year maturity extension.

The transaction, issued via SPV Emerald Asset Trust, will have an FRN structure with a maturity of 2013. It will be collateralized by a loan advance of S$350 million and secured by 23 A-Reit owned industrial properties located throughout Singapore.

HSBC will act as Trustee, while BNP Paribas will provide liquidity and the swap counterparty. Fitch and Standard & Poor's have given the notes a preliminary AAA rating.

This will be the second offering from A-Reit's $1 billion MTN programme. Its July 2004 deal comprised a five-year Eu144 million issue, which priced at 33bp over Euribor.

The new deal marks the continuation of a trend, as Singapore's Reit securitization sector continues to gain traction with European investors. "The region offers geographical diversity for European investors who don't have the same wide range of asset classes to invest in as their US counterparts," says one London-based ABS banker. "This means portfolio diversification is more often achieved by diversification of jurisdiction. A lot of accounts therefore like Singaporean paper because it diversifies their portfolio in a way that can't be achieved solely by collateral."

The whole deal was placed in Europe.

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