Latitude broadens Kiwi ABS
Structured Finance RBNZ seeks securitisation boost from new RMO instrumentBY JOHN WEAVERSNew Zealand’s shallow but
expanding structured finance
market welcomed a new
visitor last Thursday when
LATITUDE FINANCIAL SERVICES
debuted with a NZ$200m
(US$138m) credit card
securitisation.
Latitude certainly enjoyed
some scarcity value as only
the fourth originator of non-
mortgage Kiwi ABS since the
global financial crisis.
RMBS sales have also been
scarce with just four issuers
printing five New Zealand
dollar offerings over the
same period, including the
well received and upsized
NZ$200m inaugural printfrom consumer lender Avanti
Finance in August, Avanti
RMBS 2018-1.
Domestic demand for
these products is strong as
underlined by the success of
this year’s issues and New
Zealand investors’ purchases
of Australian dollar ABS,
though offshore interest
remains deterred by non-
resident withholding tax and/
or the approved issuer levy –
additional costs which do not
exist in Australia, according to
a local syndication manager.
“The market’s big problem
has been a lack of issuance.
The major banks have focused
exclusively on internal RMBS
and offshore covered bonds
for their secured fundingneeds while there are few
non-major banks and non-
bank lenders that are able
and willing to access the
ABS market, certainly in
comparison with Australia,”
he said.
Things may be about
to change, however, as
the Reserve Bank of New
Zealand pushes on with its
plans to encourage major
bank participation through
a proposed new “high-grade
RMBS standard”, Residential
Mortgage Obligations (RMO),
that will replace illiquid
internal RMBS, 100% of which
are bought by the mortgage
originator.
The RBNZ said it hopes
RMO will address the shortageof high quality liquid assets
(HQLA) in the New Zealand
markets, offer mortgage
lenders an additional funding
tool and help develop
mortgage bond markets.
The Reserve Bank’s latest
RMO consultation paper
released in November
responded to largely negative
feedback from industry
experts to its initial paper in
November 2017.
Of particular interest is
the proposal to limit the
originator’s holdings to 50% of
the senior RMO notes while a
further maximum 35% can be
held by other banks.
This means at least 15% of
senior RMO notes must be sold
to non-bank (ie, real money)
investors, a development that
would provide an obvious
boost to market liquidity and
secondary trading activity.
The RBNZ has set a deadlineHuawei sours Samurai outlook
Loans Companies seek to take advantage of low-cost fundsBY WAKAKO SATOThe arrest of HUAWEI
TECHNOLOGIES‘ CFO at the request
of US authorities has curbed
Japanese lenders’ appetite for
the company’s debut Samurai
loan, potentially hurting future
deals from Chinese borrowers.
The three Japanese mega
banks – Mizuho Bank, MUFG
and Sumitomo Mitsui Banking
Corp – are now in talks with
the borrower on its US$300m-
equivalent three-year Samurai
loan, sources said. The
financing, which was equally
underwritten by the trio,
was launched into general
syndication in November
with responses due in mid-
December, but may now be
scrapped.
“This proves even a global
company like Huawei has high
political risks, so any Chinese
names would be recognised as
highly risky going forward,”
one banker said.
Meng Wanzhou – one ofthe vice chairs on Huawei’s
board and the daughter of
founder Ren Zhengfei – was
arrested in Vancouver airport
on December 1. She is facing
extradition to the United
States, Canada’s Department of
Justice said on Wednesday. The
arrest is related to violations of
US sanctions, Reuters reported.
Meanwhile, Japan
plans to ban government
purchases of equipment from
Huawei and fellow Chinese
telecommunications company
ZTE to beef up its defences
against intelligence leaks and
cyber attacks, sources told
Reuters on Friday.
Huawei’s Samurai loan,
denominated in Japanese
yen and targeting Japanese
investors, was set to be the
first such borrowing from
China’s corporate sector
and the third Samurai loan
from mainland China under
discussion in recent months.
BANK OF COMMUNICATIONS
FINANCIAL LEASING and CMBFINANCIAL LEASING are also testing
the waters in the thriving
Samurai loan market, in a
move that could open up a
new funding option despite
the often fractious relationship
between the two countries.
More Chinese leasing
companies are already said to
be considering Samurai loans.
Appetite for the proposed
debut three-year facilities- which would be the first
from China in the Samurai
loan market since 2011 –
will be closely watched,
amid early signs of a mixed
response. While the country’s
biggest lenders see rising
opportunities in China, smaller
banks are still sceptical.
“I don’t think the Huawei
probe would directly impact
Chinese leasing borrowers
as the sectors are different,”
another source said.
DECADE HIGH
Samurai loans, which are
distributed in Japan anddenominated in yen for
international borrowers, have
hit a decade-high volume
this year as international
companies take advantage of
low-cost funds and domestic
banks seek high-yielding loans
amid ultra-low interest rates
at home.
Overseas borrowers have
raised US$5.135bn via 18 deals
so far in 2018, compared with
the US$2.729bn via 12 deals in
2017, according to LPC data.
The growing interest from
Chinese companies follows
the example of several Indian
borrowers, which have tapped
the Samurai loan market in
increasing numbers this year.
Samurai loan volume for
Indian borrowers has already
reached US$1.088bn via three
deals so far this year, more
than five times the volume
recorded in 2017, according to
LPC data. Before that, Indian
borrowers were almost non-
existent.
“China could be the nextNews