Macquarie, Wanda to raise US$145m
In pioneering China deal, bond issue will be backed by nine mainland malls
Macquarie Bank, Australia's largest investment bank, and mainland property developer Wanda Group plan to raise US$145 million by selling bonds backed by shopping malls in the first ever such deal in the mainland, market sources say.
The deal will be based on nine mortgage loans to an offshore vehicle in the Mauritius Islands and is secured by the same number of mainland malls, which are valued at about US$475 million.
Tenants at those malls include US retailer Wal-Mart, mainland department store operator Parkson, electronics retailer Gome, and fast-food chains KFC and Pizza Hut.
The deal, known as a commercial mortgage-backed securitisation, has a maturity of 2.75 years. Such notes provide income earned from rents to investors and enable developers to generate cash instead of bank borrowings to buy new properties.
Citigroup and Macquarie will arrange the deal. The banks will meet potential investors in Singapore today and tomorrow before marketing to Hong Kong investors from next Monday to Wednesday.
Investor interest would be strong because China offered only simple bonds and the structured deal is from the fast-growing property sector, said a credit analyst.
The deal, dubbed Dynasty Assets (Holdings), carries a preliminary rating of A-minus from Standard & Poor's, its seventh highest grade. Moody's Investors Service provisionally rates the deal one notch higher at A2.
Comparable transactions include the HK$3.6 billion bond sold in July by Hong Kong's The Link Real Estate Investment Trust, HK$290 million of mortgage-backed notes by Singapore's Fortune Real Estate Investment Trust last year and other similar notes sold by European firms, market sources said.
The two-year The Link Reit bonds trade at 128.7 basis points over comparable Hong Kong government bonds and yield 5.1 per cent. Fortune Reit's notes trade at 63.2 basis points over the three-month Hong Kong interbank offered rate and yield 4.87 per cent.
'The question is how do investors draw the line [in terms of price] on very different currencies, different assets, and different debt instruments,' said a source familiar with the transaction.
Macquarie and Wanda Group had hoped to raise funds through listing a real estate investment trust in Hong Kong earlier this year but the plan was halted by the Securities and Futures Commission which refused to allow the Dalian-based firm to manage the properties, sources said.
The deal is a welcome entrant to Asia's limited US dollar denominated commercial mortgage-backed securities market outside Japan. This year two borrowers have raised US$152 million from such deals.
Tenants include Wal-Mart, Parkson, KFC and Pizza Hut
Investor interest to be strong because of limited vehicles
Selling starts in Singapore today and Hong Kong next week