Shanghai is to launch a pilot guaranteed asset-backed financing programme with an initial size of five billion yuan (about HK$4.65 billion) to help its small and medium-sized enterprises (SMEs) to seek funding.
The plan - the first such experiment on the mainland - is to provide SMEs with a new avenue to funding and to offer financial institutions innovative solutions for credit-risk management, funding and regulatory issues facing them, Hong Kong-based Horizon Capital president Teddy Cheng said.
Horizon is the deal's arranger.
Under the programme, a new trust with limited purpose, with the backing of a guarantee company, will obtain funding commitments from local financial institutions, to purchase receivables from SMEs and to repackage them into quality notes and sell to the funders.
At the outset, the programme will adopt a mechanism along the lines of internationally accepted practices, such as bankruptcy remoteness, Mr Cheng said.
'The mainland's asset-backed funding market holds considerable potential, as there are ample supplies of assets all across the public and private sectors,' he said.