First Taiwanese ABS finally ready to go

IBT and SG get regulatory approval for CLO.

Whoever first uttered the phrase all good things come to those who wait could well have had the Taiwanese securitization market in mind. But after a year in the making, the country's first ever ABS deal has finally been launched.

The Industrial Bank of Taiwan (IBT) and SG signed a cooperation agreement in September 2001 to jointly develop the securitization market in Taiwan. In January 2002, the two parties announced they were moving ahead with plans for a collateralized loan obligation (CLO) backed by IBT originated receivables.

At that time, the final touches were still being put to the regulatory legislation for securitization that at that stage had not been passed. The securitization law was finally passed over the course of July and August 2002, and a number of other potential issuers - including Chinatrust Commercial Bank, Sinopac, Hua Nan Bank and Cosmo Bank - announced their own intent to issue ABS deals.

Nonetheless, sources close to the IBT/SG deal remained cautious about forecasting when the deal would finally be ready for launch, privately stating that launch before end of 2002 was the target, but January 2003 was more likely. In any new securitization market, the first deals are always likely to take longer to complete in order to satisfy the concerns of the regulators.

At long last, the regulators are now satisfied with the structure of the transaction and earlier this week the Ministry of Finance approved a NT$3.65 billion ($105.31 million) deal backed by a portfolio of 41 corporate loans. Fubon Securities was hired as lead manager to handle the placement.

The deal is split into two tranches: NT$2.81 billion of senior notes, which are expected to be rated twA by Taiwan Ratings Corp and a NT$840 million subordinated piece that will be held by IBT. The coupon for the senior bonds, which have expected average lives of 3.7 years, has been set at 2.8%.

The relatively high rating enables bond funds, which reportedly absorb around 70% of domestic bond deals, to invest in the deal. A banker familiar with the transaction said that interest has been good and expects to close books either next week or the second week of February.

"We got the regulatory approval on Monday and all the documentation is ready, but what with Chinese New Year and everything, the deal will hopefully be closed early next week," the banker says. "Most of the paper has been placed already, so wrapping it up should be a formality."

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