Sanwa launches US$144m mortgage-backed securities

Sanwa Finance Hong Kong, a subsidiary of Sanwa Bank, yesterday launched a US$144 million mortgage-backed securities issue, the first Japanese entity to do so in the territory.

The issue features a cross-currency swap which enables it to be denominated in US dollars while the underlying mortgage portfolio has a Hong Kong dollar cash-flow.

The issue has a legal maturity of 20 years and will pay a coupon of about 20 basis points over the three month London interbank offered rate. It will be issued through a Cayman Islands incorporated vehicle, Hong Kong Homes Funding Corporation (1).

Assuming a constant prepayment rate of 20 to 30 per cent per annum, the issue has an expected average life of about three to four years.

It will be 100 per cent guaranteed by the US-based MBIA Insurance Corp and is expecting triple-A ratings from Standard & Poor's and Moody's.

Sanwa Bank Hong Kong branch, the arranger of the issue, said the MBIA credit enhancement enabled the issue to receive a rating well above Hong Kong's single-A sovereign ceiling in a bid to achieve a low interest spread.