Chinatrust Commercial to issue MBS

The bank becomes the latest Taiwanese entity to confirm securitization plans.

Chinatrust Commercial Bank has become the latest Taiwanese bank to confirm plans to securitize, as the country's financial institutions seek to exploit the securitization legislation that was passed in July and August.

FinanceAsia understands six foreign banks have submitted proposals with a decision on who has been awarded the mandate expected before the end of this month. Chinatrust would not confirm the bidders, but given which banks have been sounding out opportunities, likely candidates would include Citibank/SSB, CSFB, Deutsche Bank, JPMorgan, Morgan Stanley, Nomura, Standard Chartered and SG.

Although Chinatrust would not commit to a timeframe it would like to get the deal completed by, an official at the bank's special working group for securitization told FinanceAsia that it was probable that the deal would be backed by mortgages.

"At this time we think the deal will securitize loans from our adjustable rate mortgage portfolio," the official says. "We actually launched the product last March with a view to securitizing these assets. To make it economically viable we would be looking to do a deal for at least NT$5 billion ($143.7 million)."

Chinatrust has become the third Taiwanese bank to officially confirm plans to launch an MBS deal, following the announcements of First Commercial Bank and Hua Nan Commercial Bank. According to market rumours, Deutsche has been mandated to arrange a NT$5 billion offering for the former and is also, along with Citi/SSB and Standard Chartered, in the running for the Hua Nan mandate. An announcement on that is expected in the next fortnight.

Meanwhile, Cosmos Bank recently selected HypoVereinsbank to handle its debut issue, a consumer loans deal for at least $100 million, the same assets that will be securitized by the Industrial Bank of Taiwan (IBT), in a transaction led by SG.

The two parties signed a cooperation agreement in September 2001 to jointly develop the securitization market in Taiwan before putting pen to paper in January 2002 on a deal that will raise between NT$3 billion and NT$4 billion for IBT.

Bankers close to the deal say privately that they want to get the transaction closed by the end of this year, an understandably conservative attitude to take when trying to get a first-time deal through brand new legislation.

Nonetheless, despite the extra effort that goes hand in hand with such deals, securitization professionals at almost every foreign investment bank have spent a lot of time in Taipei in the past year, such is the confidence in the potential of the market.

Many bankers see similarities between Taiwan and Korea, the most active country in the ex-Japan Asia ABS market, both in terms of the range and size of assets that could be securitized and also because both have a large investor base.

However, some bankers also feel that after the initial burst of activity in the domestic market, opportunities for foreign houses will be limited to cross border deals. This is based on the logic that, having gained some experience by working with foreign houses on their own deals, local banks will be develop the skills to structure deals for Taiwanese borrowers.

The Chinatrust official agreed that this was the intention for his employers. "That is one of the benefits we will get from doing a securitization," he comments. "We want to cooperate very closely with our foreign advisor, so that we will be able to advise Chinatrust clients on their own deals."

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