Silver Oak is a special-purpose vehicle incorporated in Singapore. The properties are managed by CapitaLand Property Management, a joint venture formed by CapitaLand Commercial Management and CapitaLand Retail Management.
The originator of the deal is RCS trust.
The new deal prices inside or at the tight end of suggested price talk.
The deal consists of a Class A1 $427 million (S$670 million) AAA/AAA/Aaa rated tranche; a Class A2Ç30 million (S$60 million) AAA/Aaa (un-rated by S&P) rated tranche and a Class B $86.5 million (S$136 million) AAA/Aa2 tranche. All of the notes carry a floating rate coupon and have an expected maturity of September 2011 and a final maturity of September 2013.
Final pricing came at 19bp over 3 month Libor for the Class A1 notes, 23bp over 3 month Euribor for the Class A2 notes and 28bp over 3 month Libor for the Class B notes.
The Class A1 notes were initially marketed to investors at a coupon of 20bp to 22bp over Libor, while the Class A2 notes were marketed in the 24bp over Euribor area. The Class B notes had a price talk of 28bp to 30bp over Libor.
With the dearth of issuance from the Asian ABS space this year, this new deal helps to provide a newer benchmark for the region's offshore CMBS market. The last CMBS deal out of Singapore was a S$433 million ($256 million) seven-year deal offer from CapitaMall Trust in October of 2005 û that deal was marketed to investors at 24bp to 25bp over Libor. The offering priced at the tight end of guidance at 24bp over.
This deal prices quite aggressively given the fact that it is the first of its kind in 2006 lacking the momentum that had built up around the asset class in 2005, especially from European accounts.
Furthermore the deal includes a hotel component û Swissotel The Stamford - to the underlying property. Hotels have historically been seen as a problematic asset by CMBS investors due to their volatile cashflows. This deal mitigates that concern by structuring hotel income under a lease agreement with a minimum rent structure to moderate that instability.
The transaction also prices inline with other similarly structured deals emanating out of Europe, meaning that it has not been hindered by the supposed Singapore or Asian premium.
The proceeds will be used to extend a loan to HSBC Institutional Trust Services (Singapore) in its capacity as trustee-manager of RCS Trust. A fixed rate six-year term loan facility of S$866 million will be provided to enable RCS Trust to partly finance the purchase of the property.
In addition, there will be a S$164 million revolving credit facility extended by HSBC to the issuer. Drawings under the Silver Oak RCF by the issuer will be on-lent to the borrower for the purpose of covering working capital or asset enhancement works of the RCS Trust. The Silver Oak RCF will be subordinated to the Series 001 Notes.
Collateral will be provided by Raffles City, secured by first-registered mortgages or assignments of agreements to lease. The primary credit enhancement will be provided by equity by virtue of over-collateralisation of the asset.
The property outlook is very favourable given its access to SingaporeÆs public transport system and its high pedestrian traffic.
According to Fitch Ratings pre-sale report, ôRaffles City is a mixed development located in SingaporeÆs downtown core above the City Hall MRT station. It enjoys good connectivity and accessibility along the North-South and East-West MRT lines as well as the proposed Esplanade MRT station on the Circle Line MRT system, which is scheduled to open by 2010. The site has a 99-year lease ending in July 2078. As at 31 March 2006, the properties have a large and diversified tenant base comprising 144 retail leases, 49 office leases and one hotel and convention centre lease, with an occupancy rate close to 100%. Under the hotel and convention centre lease, Raffles City Convention Centre and the two hotels are leased to a third party on a 20-year lease with an option to renew for a further 20 years.ö
The currency and interest rate swap will be provided by HSBC.
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