CapitaLand plans to launch number two ABS

Property developer will follow up last June''s S$200 million issue before year is out.

CapitaLand Residential, the property unit of CapitaLand Ltd that specializes in building homes in over 17 countries, is set to tap the securitization market for the second time before the end of the year.

HypoVereinsbank has been mandated to arrange the deal, which will be around the S$200 million ($112.1 million) mark. The bank also handled CapitaLand's debut offering, a S$200 million issue launched in June 2001 out of the Peridot Investments special purpose vehicle.

As with the first transaction, and a S$300 million issue structured by Hypo for Keppel Land in June this year, the second deal will securitize pre-sale contracts of luxury condominiums in as yet incomplete apartment blocks. There are as yet few details on which properties will make up the underlying collateral, but observers say there should be a "similar structure to the first deal".

At the time Peridot was launched, only 40% of the construction work had been completed on three apartment blocks located in Singapore: Palm Grove, The Loft and Sun Haven. 71% of the units were already sold; with an expected total sale value of S$504.2 million set against estimated construction costs of S$166.5 million.

Fitch rated the deal, making it the first securitization from Singapore to get such treatment from an international credit rating agency. The four tranches each had an expected average life of six years and legal maturity of nine years.

The S$160 million senior notes, rated triple-A, carry a fixed rate coupon of 3.71%, which equated to 32bp over six year swaps when the deal was priced. The S$18 million AA rated tranche priced at 3.83%, or 44bp over swaps; the S$12 million single-A bonds were offered at 4.09%, 70bp over; and the subordinated S$10 million piece, rated BBB, carried a 4.79% coupon, 140bp over swaps.

Hypo employed a straightforward generic pass-through structure on the first deal, with protection for the triple-A investors coming from subordination on the other tranches. Extra insurance came from 41.2% overcollateralization; a cash reserve fund and an S$80 million completion guarantee provided by Hypo.

Keppel's deal, backed by pre-sale contracts on 455 apartments in the Amerada Gardens, Butterworth 8 and The Edgewater developments, featured a more unusual 'two-step' structure. Rather than Keppel directly transferring revenues into an offshore SPV, Hypo actually paid S$265.3 million to Keppel to purchase the receivables and issued the bonds itself out of a Singaporean-incorporated SPV called Jasmine Investment Corporation.

This structure was used at the behest of Keppel, which was looking first and foremost to do an off-balance sheet deal with the secondary benefit of reduced gearing.

Jasmine issued notes in both US and Singapore dollars: a $144 million piece and two Sing-dollar tranches worth S$45 million. All three tranches had expected maturities of 3.5 years and legal maturity of five years.

The senior US dollar piece, rated triple-A by Fitch, Moody's and S&P, priced at 33bp over three month Libor. Additionally, the S$30 million class B notes û rated Aa2 by Moody's and double-A by the other agencies û and S$15 million single-A rated class C notes offered fixed rate coupons of 2.97% and 3.25%, 58bp and 86bp over Sibor.

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