Centrepoint Properties Limited (CPL), a subsidiary of one of Singapore's biggest property companies Fraser & Neave, has launched a $162 million securitization via Standard Chartered.
According to Warren Lee, head of Asian securitization at StanChart, the bank will market the deal to European investors in the UK, Benelux, Ireland and Germany as well as buyers in the Middle East and Asia. The bank will target offshore banks, asset managers and pension funds and Lee expects the deal to be completed in September.
The three-year deal is backed by future revenues from sales of 612 condominiums in the Cote d'Azur residential project that is being developed by Marine Parade View (MPV), a unit of CPL. According to CPL, 97% of the properties have already been bought.
Under the structure of the deal, Riviera Investment Limited - a Singapore incorporated special purpose vehicle - will issue $162 million in bonds and then use the proceeds to lend MPV S$285 million ($164 million) to refinance land acquisition and for construction costs at a lower rate of interest.
Fitch is likely to rate the bonds, which have expected average lives of 1.6 years, at the triple-A level.
The use of securitization by Singaporean property companies has become increasingly popular within the last two years with the likes of CapitaLand and Keppel Land issuing similar transactions to the one being done by CPL.
"Many real estate companies use the ABS product as a fundraising instrument because it fits the nature of their business which constantly requires new capital for upcoming projects," says David Worth, global head of capital markets at StanChart. "These companies have traditionally relied on bank financing. The use of their underlying real estate assets in a securitization allows real estate companies to diversify their funding away from an over-reliance on banks to that of institutional investors."
As for pricing, indicative market talk suggests anywhere between 30bp-35bp over Libor. Lee did not go into such detail but says pricing will be in line with previous ABS deals in Singapore.
The transaction gives a boost to StanChart's securitization franchise, which was established in July 2002, and Lee says the bank is currently working on other deals in the region.
"This deal is the bank's first ABS transaction in Singapore, where ABS is a relatively new financial innovation and alternative source of funding for real estate companies," he says. "Since the establishment of our ABS business in 2002 we have completed deals in India and Turkey. Currently we are working on several mandated transactions in South East Asia and Hong Kong and pursuing deals in Korea, Taiwan and the People's Republic of China."