By joining forces to structure a primary collateralised loan obligation (CLO), the companies are able to put together a chunkier deal with an enhanced credit rating: a five-year M$950 million ($260 million) issue comprising of three AAA-rated senior tranches, a AA-rated mezzanine tranche and a BB subordinated note. The 33 borrowers are all rated below AA by Malaysian Rating Corporation.
Of course, credit enhancement such as this comes at a price. To achieve ratings that will attract investors in MalaysiaÆs capital markets, the borrowers have agreed to pay the first 10% of losses from loan defaults. This structure û with the borrowers providing the subordination û is similar to all four previous Malaysian CLOs: Aegis One (November 2002), Kerisma (June 2004), CapOne (September 2005) and Idaman Capital (October 2006).
RHB will originate loans for each of the companies and simultaneously sell them to a special purpose vehicle, Prima Uno, which will then issue bonds backed by the loans. Unlike the previous deals, Prima Uno offers a bigger and more diversified group of companies: 33 names from 15 different sectors. It also introduces borrowing limits based on the companiesÆ credit risk. At the bottom of the range, BBB+ borrowers are limited to a maximum of M$30 million, while single-A borrowers can raise up to M$40 million.
When the deal closes at the end of January it will have raised M$290 million from the super senior A-series of notes, M$335 million from the super senior B-series, M$190 million from the senior series and M$40 million from the mezzanine notes. The companies will buy M$95 million of subordinated bonds, which means that investors in the mezzanine notes are protected from the first 10% of losses. Further up the capital structure, investors get 14% protection from the senior notes, 34% protection from the B-notes and almost 70% protection from the A-notes.
Nomura is the technical adviser to the transaction and Zul Rafique & Partners is the legal adviser.
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