Structured Finance Issue

IFR Asia Awards 2013
3 min read
Asia

Property is one of the most important sectors for Singapore banks when it comes to lending. In a nation that has seen exponential price appreciation for residential developments in the past decade, being able to finance more buildings is a key focus.

However, local banks have been reaching their limits on lending to individual developers and to the sector as a whole, especially since the government started forcing less lending to the sector to curb the appreciation of property prices.

Against that backdrop, securitisation sounds like the obvious solution. Yet, for the past five years, there had been nothing related to property in the South-East Asian structured market until Singapore developer TG Master’s Orchis Capital ABS.

The deal updated an old idea of securitising progress payments to free up capital trapped in the project account.

That allowed banks to reduce lending to the company as it works to finish the ongoing project, freeing up balance sheets to lend elsewhere. It also brought TG Master money upfront that would otherwise only be seen after its project’s completion.

Although others have yet to follow the structure, bankers at sole-lead DBS have received lots of enquiries about it and expect to reproduce it soon.

Investors have also proven keen to buy securitisation bonds again.

“People are finally warming up again to securitisation and we expect the market-opening trades to have follow-on trades,” said Peeyush Pallav, vice president, structured debt solutions at DBS Bank.

The deal saw TG Master sell S$200m (US$160m) senior secured bonds privately through a special purpose vehicle called Orchis Capital. The Singapore dollar- denominated offering is legally due in March 2018, but has an expected maturity of March 2017 and was sold to yield 2.5%.

The bonds are backed against proceeds from presales of units in Skies Miltonia Property, a high-end project being developed along Singapore’s Yishun Avenue.

“For the client, they have got access to unencumbered capital, which they would not have been able to get in any other structure, and the cost is comparable to a loan-type instrument,” said Colin Chen, head of structured debt solutions at DBS.

“For the banking system, it allows what is potentially a choke-point, the ability to continue lending to real estate, as Singapore has real-estate limits for each bank,” he said.

Under the structure, the issuer was able to securitise future payments from buyers, who had already made a down-payment, and use the proceeds to start other projects, while Skies Miltonia was being completed.

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