The Hong Kong Mortgage Corporation Limited (HKMC) is pleased to
announce the successful launch of the first-ever partially
un-guaranteed Mortgage-Backed Securities (MBS) issued under its
Bauhinia Mortgage-Backed Securitisation Programme. The event was
marked by a signing ceremony held today (Monday).
The HKMC is by far the most active and regular issuer in the
local securitisation market and has sponsored a total of HK$13.2
billion in MBS (including today's new issue) since it began its
securitisation activities in 1999. This accounts for around a
quarter of the total issuance in Hong Kong's securitisation market
in the past ten years.
Today's MBS issue is collateralised by a pool of mortgage loans
purchased by the HKMC from the Hong Kong Housing Authority during
2001 to 2003. The MBS issue is divided into two classes of notes -
Class A notes of HK$1,740 million and Class B notes of HK$260
million.
The Class A notes carry fixed-rate coupon and have bullet
maturities. They will not be subject to prepayment risk and are
specifically designed for investors who prefer a stable return on
their investment along with the highest credit quality. On the
other hand, the Class B notes carry floating-rate coupon and have a
pass-through feature to absorb excess principal
prepayments/repayments. The Class B notes cater for investors who
can accept a higher prepayment exposure and subordination in return
for a higher investment yield. (Please refer to Annexes
for the details of the issue.)
"This MBS issue is unique in two ways," said Mr Peter Pang,
Executive Director of the HKMC. "Today's MBS issue is the first MBS
sponsored by the HKMC as a triple-A institution after its rating
upgrade by Moody's in late October 2006. The HKMC is so far the
only triple-A rated institution in Hong Kong. With its high credit
standing, the HKMC is well positioned to play a more active and
strategic role in promoting the development of the debt and
securitisation markets in Hong Kong," said Mr Pang. "Secondly,
today's issue of HK$2 billion is the first-ever partially
un-guaranteed MBS sponsored by the HKMC," he added.
The un-guaranteed Class A notes will benefit from the credit
subordination to be provided by the Class B notes, achieving a
triple-A rating by both Moody's and S&P's. The Class B notes
will carry an unconditional and irrevocable guarantee to be
provided by the HKMC. It benefits from the credit strength of the
HKMC and is assigned a credit rating of Aaa/AA.
Both rating agencies noted that the assigned ratings of the MBS
issue reflect the credit quality of the underlying mortgage pool,
subordination structure provided for Class A, the credit strength
of the HKMC as guarantor for Class B, the experience of the HKMC as
the master servicer as well as the structuring of the issue with
liquidity facility and reserve fund.
A diverse group of investors including retirement funds,
insurance companies, banks and other institutional investors have
shown a keen interest in this highly rated new MBS issue.
Mr James H Lau Jr, Chief Executive Officer of the HKMC, said,
"We are glad to see the growing sophistication and interest of
investors in highly rated MBS products in this region. We will
continue to develop the local securitisation market through product
innovation and regular issuance, and strengthen Hong Kong's role as
an international financial centre and funding hub in the
region."
"HSBC is honoured to have been involved in all the HKMC's
previous public securitisation transactions, and to take a leading
role in this residential mortgage-backed securities deal which
offers a debut unguaranteed class of notes. It's very promising to
see a wider range of products in the market, fostering the
continued growth in the depth and breadth of the Hong Kong's
capital markets." said Ms Anita Fung, Treasurer and Head of Global
Markets, Asia-Pacific of HSBC.
There are six banks joining the Management Group of the Issue,
namely, Sole Arranger and Lead Manager: HSBC; Co-lead Managers: DZ
BANK AG, Hong Kong Branch, ICBC (Asia) and BMO Capital Markets Corp
and Co-managers: ANZ Investment Bank and Commonwealth Bank of
Australia.
The MBS issue will be cleared through the Central Moneymarkets
Unit operated by the Hong Kong Monetary Authority.
Annexes
The Hong Kong Mortgage Corporation Limited
27 November 2006
