Securitisations resurface in Singapore


* Two asset-backed bonds priced this week

* Local investors again warming up to the structure

* Banks prompting issuers to diversify loan funding

By Neha d'Silva

HONG KONG, Oct 18 (IFR) - Two Singapore firms completedprivate placements of asset-backed securities this week in alevel of activity for structured bonds not seen since the 2008financial crisis.

"People are finally warming up again to securitisation, andwe expect the market-opening trades to have follow-on trades,"said Peeyush Pallav, vice president, structured debt solutionsat DBS Bank.

Issuers, too, are looking at securitisation to diversifytheir sources of funding as banks run up against single-borrowerlimits and as they review their risk-weighted assets amidtighter banking regulations.

"In 2006, there was a lot of demand being driven bystructured investment vehicles and conduits. Now, it is moredriven by the fact that you must have some secured bonds andstructured debt in your capital structure in addition to theusual loans and equity for funding diversification," Pallavsaid.

The asset-backed deals today also are being structureddifferently than in their last incarnation. Bankers are nowcreating the transactions with domestic investors in mind,rather than those offshore, and selling them in local currenciesinstead of US dollars.

Another change is these deals are being placed privatelywith investors, thus shielding them from mark-to-market risks.


The proof came in the transactions last week of TG Master, aSingapore property developer, and Courts, a furniture andconsumer goods retailer.

TG Master sold senior secured bonds through aspecial-purpose vehicle called Orchis Capital. The offering,denominated in Singapore dollars, is legally due in March 2018,but has an expected maturity of March 2017.

The bonds are backed against proceeds from presales of unitsin Skies Miltonia Property, a high-end project being developedin Singapore's Yishun Avenue, featuring 420 residentialcondominiums and two commercial units. DBS was the sole leadmanager on the transaction.

Courts's transaction involved two jurisdictions as it wasbacked against pools of instalment loan receivables originatedin Malaysia and Singapore. The asset-backed bond is the first inAsia ex-Japan to involve more than one country or currency. HSBCmanaged and structured the deal.

The weighted-average life for both deals is three years,while the legal maturity for each is five years.


The success of both transactions has bankers in Singaporebetting on a revival of the securitisation market and suggestingmore deals are in the works.

However, not all issuers may want or need to dosecuritisations. Courts, for instance, may have found it cheaperto sell asset-backed securities than unsecured bonds, but thatmay not be true for others.

The retailer recently paid 4.75%, or 412.2bp over the swapoffer rate, for an unsecured three-year S$125m bond.

The pricing details of the asset-backed deals were not madepublic as they were both private placements, but bankerssuggested Courts saved significantly in issuing securitisednotes.

"Asset securitisation against our credit receivables is acompatible model to our business needs," said Kee Kim Eng,executive director and group CFO, Courts Asia.

"Our ambition to grow as a business means we willpotentially have a bigger-sized credit receivables book tosecure in exchange for a higher level of borrowings," Kee said.

Still, a banker not involved in the deal suggested that, asblue-chip developers from Singapore paid only 100bp-150bp overthe Singapore benchmark rate on unsecured paper, they wereunlikely to seek securitisations.

However, even blue-chip developers may change their minds asbanks start to hit single-borrower limits.

"Every condominium construction since the abolishment of thedeferred payment scheme in Singapore has been funded throughprogress payments, land loans, developers' equity andconstruction loans," Pallav said.

Even though most local investors are still more comfortablebuying unsecured bonds, some have warmed up to the fact thatasset-backed securities can offer better returns for theirrating, and they like that the bonds include collateral that isalso in their home market, bankers have said. (Reporting By Neha d'Silva; Editing by Christopher Langner andAbby Schultz)

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