The Korea Asset Management Corporation (Kamco) will act as special adviser on a proposed asset-backed securities deal for its Chinese counterpart, China Huarong Asset Management Corporation (Chamc), the companies announced recently.
The arrangement, which follows Kamco and Chamc signing of an MOU in February, hopes to secure around W150 billion ($115.1 million) from the issue.
If all goes to plan, Chamc hopes to complete the transaction by November, making it the first ever securitization to come out of China.
Kamco will send its advisory team to Beijing shortly to begin due diligence on which assets should make up the underlying pool, as well as looking at possible structures.
Bankers in the region will be more than a little interested to see how the story unfolds. Paramount to their interest will be to see just how Kamco goes about arranging the deal.
Although it is undisputedly one of Asia's most important issuers, launching the winner of FinanceAsia's best ABS deal last year with a $367 million cross-border securitization of non-performing loans, it has no experience of arranging deals itself.
Nonetheless, it clearly sees a potential business opportunity in arranging deals for Asia's asset management companies (AMC). Having signed MOUs with other Chinese AMCs as well as ones in Thailand and Indonesia, it would not be a major surprise to hear of similar initiatives being made between Kamco and other AMCs.
Still, that would all depend on how successful it is with the Chamc transaction, and there are a few hurdles that stand in its way. Chinese legislation does not include securitization guidelines, and it is unclear whether the special purpose vehicles that issue the bonds would be subject to corporation and withholding tax.
That would make a true sale of assets practically impossible, and would require structural expertise to launch a quasi-securitization that would satisfy Chinese rule makers and the issuer.
