Danaharta, the Malaysian state-run asset management company (AMC), has finally selected its advisers for what should be a high profile securitization scheduled for the second half of this year.
Deutsche Bank and Alliance Merchant Bank have been mandated to structure and lead manage the transaction. Danaharta has the responsibility of cleaning up the country's non-performing loans (NPLs).
Deutsche fended off competition from Merrill Lynch and Credit Suisse First Boston to win the international advisory position.
It is the second time the bank has been brought in to advise an Asian AMC on an asset-backed securitization (ABS), following its involvement with the Korean Asset Management Company (Kamco) on a successful $367 million international deal last year.
That transaction, for which Deutsche acted as joint lead alongside UBS Warburg, was the first ever Asian cross-border NPL securitization and won Best Asset Backed Deal in FinanceAsia's end-of-year review.
It is possible that Kamco, which also accounted for 30% of all domestic Korean ABS issuance in 2000, is seen as a positive role model for Danaharta. Deutsche's involvement in a high-profile deal may also have swayed Danaharta's decision when it awarded the mandate.
The current deal will securitize assets from Danaharta's rehabilitated loans portfolio. At the end of last year, the company had turned approximately M$5.45 billion ($1.43 billion) of acquired NPLs into performing loans.
Some M$3.7 billion of these assets had been performing for over twelve months. Danaharta confirmed in April that a part of these would back the first deal and would also give the company the flexibility to sell tranches of differing maturities at different times.
As yet, details as to timing, structure, and the likely amount to be raised are uncertain, although speculation suggests it will be a domestic deal worth between $200 million and $250 million.
An official at Danaharta would only confirm that Deutsche produced the most competitive offer. "It was a bid process tender and they gave us the best deal," the official says. "I can also confirm that we wanted to bring in a foreign house to work with a domestic bank on the deal."
A banker at Deutsche was also unwilling to give specifics at this stage, only stating that the deal was "very likely" to be completed by the end of this year,
However, the banker was more forthcoming on what he sees as a promising market for securitization. "Obviously, we view this being a significant deal, as significant as the Kamco [deal] and maybe more so because it is the first of its kind in the market and we hope it will set the standard within Malaysia," he said. "There have been a lot of enquiries on possible structures from Malaysian companies since the ABS law was put in place in April. Where we go from here is uncertain, but it is a market we are looking into seriously."
The deal will certainly be the first for Danaharta and the first Malaysian deal backed by loans, but it will not be the first securitization to come out of Malaysia. That honor will be bestowed upon semi-conductor company First Silicon, whose floating rate dollar-denominated bond is due to price within the next two weeks.
The $250 million deal, rated Baa3 by Moody's because of a guarantee provided by the Sarawak Economic Development Corporation, is being lead managed by Nomura. It is unusual in that it will be a whole business securitization, where the total assets of a company rather than specially selected receivables from one part of its business are used to back a deal. In this case, the assets will be made up of revenues taken from sales of processed wafers.
The First Silicon and Danaharta deals mark something of a watershed for the ABS market in Malaysia after years of frustration caused by the lack of any securitization legislation.
The situation improved in April when the Securities Commission set out comprehensive guidelines for ABS issuance. These allowed special purpose vehicles to be set up without being subject to withholding and corporation tax. Uncertainty over these tax issues and as to whether assets could be transferred off a company's balance sheet into the SPV -- a true sale securitization -- had prevented the use of this funding tool in the past.
