Thailand's finance companies are preparing for changes brought on by the government's financial master plan by raising funding through securitizations. The plan, among other things, will abolish finance company licences, forcing the finance outfits to apply for bank licences or to merge with existing full-service banks.
National Finance and Aeon's Thai subsidiary are both planning securitizations. Aeon will raise Bt1.5 billion in a deal backed by receiveables from hire-purchase loans for consumer goods. The deal, arranged by Standard Chartered, has a final legal maturity of six years and a revolving period of three-and-a-half years. It is rated AAA by Fitch and the SEC is expected to to approve the transaction either at the end of this week or early next week.
Aeon's will be the first consumer finance receiveables securitization from a private sector company under the Thai securitization law, according to Lesi Zuo of Standard Chartered in Hong Kong. To price the deal bankers will look to AAA-rated corporates for benchmarking. Freshfields is advising on legal issues relating to the structure of the deal.
National Finance's deal was announced at a press conference on Tuesday by Bandit Cheevadhanarak, the managing director, who said that the company planned to raise Bt12 billion through securitizations in 2004. He claimed that the first of these deals, for Bt3-5 billion, would be launched this month, but a source at the group's corporate finance team says the first deal will not happen until June.
It is expected that National Finance's subsidiary, Thanachart Bank, will arrange the deals but no decision has been made yet.
However, Aeon and National Finance were both part of an international roadshow at the end of January organized by the stock exchange, ministry of finance, central bank and CSFB. In total nine consumer loan specialists traveled to London, Boston and Singapore to familiarize investors with the implications of the master plan on the Thai financing industry and to promote the stock market.
Under the pre-master plan regime only specialist consumer finance companies could take part in the hire purchase business, which meant that full-service banks such as StanChart had to establish subsidiaries if they wanted to get involved. But the problems of funding subsidiaries meant that capitalizing on the rapidly growing market, particularly for car loans, was a challenge. By allowing banks to bring these consumer finance companies back under their wings, or for the companies to become banks in their own right, it is hoped that the industry will be better prepared for liberalization and greater foreign competition.
Tisco, National Finance's main rival, has already announced plans to convert to a full bank licence this year and it is expected that National Finance will merge with Thanachart later this year too.
It is a busy month for Aeon, which is best-known for its Hello Kitty credit cards. In Hong Kong, Aeon's local subsidiary has closed the territory's first securitization of 2004, raising HK$850 million in a private placement arranged by Mitsubishi Securities that closed on Wednesday.
The deal has a final legal maturity of April 2008 with a revolving period up to September 2005 and will securitize Hong Kong-dollar receiveables from credit card payments. The receiveables will be sold to Nihon, a special purpose entity, which will then issue the notes. The deal is rated A by Standard & Poor's. Lovells advised on legal issues.
