Standard Chartered Lead Manages USD162 Million Asset-Backed Securitisation Deal

21 August 2003 - Standard Chartered announced today that it will be marketing a USD162 million asset backed securitisation deal for Riviera Investment Limited (Riviera), a special purpose company incorporated in Singapore. This is Standard Chartered Bank’s first asset-backed securitisation deal in Singapore and Fitch expects to assign the deal a “AAA” rating.

Riviera’s asset-backed securities will be backed by receivables from the sale of condominium units in Cote d’Azur, a 612-unit residential project developed by Marine Parade View Pte Ltd (MPV), a wholly owned subsidiary of Centrepoint Properties Limited (CPL).

Asset-backed securitisation is the arrangement for raising funds through the issuance of marketable securities backed by predictable future cash flows from revenue-producing assets. It is a relatively new financial innovation in Singapore and an alternative source of funding for many real estate companies here.

David Worth, Global Head of Capital Markets, Standard Chartered, said:

“Many real estate companies use the ABS product as a fundraising instrument because it fits the nature of their business which constantly requires new capital for upcoming projects. These companies have traditionally relied on bank financing. The use of their underlying real estate assets in a securitisation allows real estate companies to diversify their funding away from an over-reliance on banks to that of institutional-based investors.”

David added that the use of securitisation will become core to many businesses in Asia, and Singapore in particular. It is sound financial management on the part of the companies as a well-structured ABS product frequently promotes capital efficiency and in this case lowers the cost of financing for Cote d’Azur.

MPV has sold units to the buyers of Cote d’Azur under a deferred payment scheme and is entitled to the future payment from buyers. Under the structure of this transaction, Riviera will issue USD162 million in bonds and will lend SGD285 million to MPV under a loan agreement for it to refinance the land acquisition cost and to meet the construction costs of the project. The interest on both the loan and bonds are payable quarterly in arrears.

Fitch’s triple-A rating reflects the mitigation of the construction and end buyers’ default risks through the completion guarantee, transaction structure, sufficient cash flow generated from progress payments made by buyers, the fully-funded project account covering fees and expenses, including interest on bonds. Such a rating also shows the soundness of the capital and legal structure.

Standard Chartered will be marketing this debt instrument internationally and it expects a good level of interest from institutional investors including offshore bank accounts, asset managers and pension funds.

David said:

“This issue has received strong interest from these institutional investors not only because of its rating but also the quality of CPL as a developer and the scarcity of well-structured ABS deals from this part of the world.”

This is the Standard Chartered’s first ABS deal in Singapore. The Bank’s Capital Markets team was first formed in 2000 and has since developed capabilities covering fixed income, credit derivatives, synthetic securitisation and asset-backed securitisation. For the first six months of the year, the Bank is the top arranger of Singapore Dollar Bonds with 11 issues worth SGD807 million and a 22.8% share of the market. Standard Chartered formed its ABS unit in July 2002 across its international network.