Malaysia's state mortgage company has hired three banks to arrange the country's biggest ever securitization. Cagamas says the deal will be a M$2 billion ($525 million) residential mortgage-backed securitization (RMBS); twice the size of the previous biggest deal, a M$1 billion collateralized loan obligation (CLO) from Alliance Merchant Bank.
Lucrative securitization mandates are scarce throughout the region at the moment, thanks mainly to the drop-off in Korean issuance, and the competition to get on this deal was pretty hot according to one banker who pitched for it. In the end, Cagamas opted for Standard Chartered, along with local banks Aseambankers and Commerce International Merchant Bankers. The mandate is another feather in the cap for StanChart's growing securitization team, which has just completed a deal for Hyundai Capital in Korea and is one of the few banks in the region that can complain of being busy with real deals.
Cagamas is a particularly attractive client for the international banks as it promises a rich pipeline of deals - its RMBS will be backed by mortgages bought from the ministry of finance, which is estimated to have about M$25 billion of such loans that it is keen to offload. That puts StanChart in pole position to pick up any subsequent offers.
This might be Malaysia's biggest securitization to date, but it is half the size of what some bankers were expecting given that the ministry is sitting on such a rich pool of loans. There was even talk that the deal could be for as much as M$5 billion. But, in the end, Cagamas has chosen to drip-feed the market rather than flooding it.
Malaysian securitization has gotten off to a slow start, despite the excitement generated three years ago by Nomura's ground-breaking $250 million cross-border offer from First Silicon, which fueled hopes that Malaysian originators might embrace the product. That hasn't happened. Deal flow has been weak and, when deals have come along, they have been small. Nomura has done a couple of other deals - one for Affin Bank and the M$1 billion CLO - and Deutsche closed a property deal for Sunway earlier in the year, but other foreign banks have struggled to get deals off the ground.
