Good afternoon, ladies and gentlemen,
Let me first extend to all of you a very warm welcome to today's
signing ceremony. Today's issue of mortgage-backed securities (MBS)
under the Bauhinia Mortgage-Backed Securitisation Programme of the
Hong Kong Mortgage Corporation (HKMC) is unique in two ways.
First, this is the first time the HKMC has sponsored an MBS
issue as a triple-A rated institution. On 30 October, Moody's
announced the upgrade of the HKMC's domestic currency rating to Aaa
and the HKMC's foreign currency rating to Aa1. The HKMC has
therefore made history as the first entity in Hong Kong, and so far
the only one, to have a triple-A rating.
The upgrade in credit ratings reflects the financial strength of
the HKMC and the strong support of the Hong Kong SAR Government for
the Corporation. With this strong credit rating, 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.
Secondly, today's issue of two billion dollars marks the launch
of the first-ever partially un-guaranteed MBS sponsored by the
HKMC.
The nine MBS issues sponsored by the HKMC so far, totalling $11
billion dollars, have all been guaranteed by the HKMC. These issues
were all welcomed by investors. The HKMC prides itself on being a
financial institution that spearheads product innovation in Hong
Kong's capital markets. For this issue, after consulting the
market, the HKMC has decided to adopt a MBS structure along the
lines of a Collateralised Mortgage Obligation. The CMO structure
divides the pool of underlying mortgage assets into credit tranches
or classes with different tenors and interest rates to suit the
appetites of a wider range of investors in Hong Kong and the
region.
In today's two billion dollars MBS issue, the Class A portion
accounts for 87% of the issue and does not carry any guarantee.
Class B accounts for 13% of the issue and is guaranteed by the
HKMC. Class A has been assigned a triple-A rating by both Moody's
and S&P's. The award of this top rating to Class A reflects the
good credit quality of the underlying mortgage pool and the credit
enhancement through subordination provided by Class B, which
absorbs the first loss in the mortgage pool. The low level of
subordination at 13% reflects the high quality of the collateral,
the innovative structuring of the issue and market's confidence in
the HKMC's ability to manage the credit risk of the mortgage
portfolio.
While there have been other un-guaranteed MBS transactions in
Hong Kong, today's issue sponsored by the HKMC is the largest
un-guaranteed Hong Kong dollar MBS in Hong Kong. Moreover, it is
the first-ever un-guaranteed Hong Kong dollar MBS that carries a
triple-A rating. I believe that the HKMC's introduction of
triple-A-rated MBS through credit tranching will become a benchmark
for other MBS issuers in Hong Kong.
With today's MBS issue, the HKMC now accounts for about a
quarter of the total securitisation transactions in Hong Kong in
the past ten years and is the largest issuer of asset-backed
securities in Hong Kong. For the future, the Corporation has plans
to expand the scope of its business to cover non-mortgage assets
and selected overseas markets - as always, in a prudent commercial
manner. These new business initiatives will help to further broaden
the local debt market, and strengthen Hong Kong's role as an
international financial centre and funding hub in the region.
We are grateful for the enthusiastic response of the banks
joining the management group for this issue and find it very
encouraging. We are also very pleased to learn that a diverse group
of investors including retirement funds, insurance companies, banks
and other institutional investors have shown a keen interest in the
issue.
Let me conclude by thanking HSBC, the sole arranger and lead
manager, for their highly professional work to make this issue a
great success. I would also like to thank the 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, for managing and distributing the issue.
I look forward to your continuing support of our Corporation and
its debt issuance activities. Thank you.
