Best ABS/MBS deal 2018
Jianyuan 2018-11 residential mortgage-backed securities
Originator: China Construction Bank
Lead underwriter: China Merchants Securities
Joint lead underwriters: Bank of China, China International Capital Corporation, HSBC (China)
Co-managers: Donghai Securities, MUFG and Standard Chartered
The launch of Bond Connect scheme in July 2017 marked a crucial step in the liberalization of China’s capital markets, granting international investors easier access to onshore renminbi bonds and structured products alike. The development also spurred a number of firsts, allowing originators such as Ford Automotive Finance (China) and JD.com to offer their securitization products through Bond Connect to a global audience.
Since then, 40 ABS deals worth Rmb278 billion ($40 billion) have been sold under the scheme, including 15 RMBS transactions and 19 auto ABS. China’s securitization market had already grown to become one of the world’s largest, after a 2015 move to relax rules for originators. It now looks set to become one of the most exciting, too.
But although there were many stand-out deals in our awards period, it was China Construction Bank’s Rmb10 billion Jianyuan 2018-11 RMBS that showed just how much potential there is in Chinese ABS.
The deal marked the first time that any of the three biggest international ratings agencies has assigned a triple-A rating to an onshore Chinese RMBS transaction, higher even than the sovereign credit rating (A1/A+/A+). Before this, the highest international rating obtained in this asset class was A+ from Fitch, by Postal Savings Bank of China’s Rmb3.82 billion Jiamei 2016-1 RMBS.
The originator, CCB – led by general manger Wang Yi, had already broken new ground in the onshore RMBS market. Since issuing China’s first-ever RMBS transaction in the interbank market in 2005, it has been the largest and the most consistent originator, and completed 20 deals during our awards period worth Rmb192.5 billion, far ahead of Industrial and Commercial Bank and Bank of Communications, which ranked second and third, respectively.
Since the launch of Bond Connect, CCB had been promoting its Jianyuan series RMBS to overseas investors, selling all deals under the scheme since March, when its Jianyuan 2018-2 offer became the first-ever Bond Connect RMBS.
The originator and the underwriters had been working closely with S&P Global Ratings for well over half a year, but the talk started even before then.
Given the difference in methodology between an international ratings agency and a domestic one, CCB updated S&P weekly, and the originator had to start from zero on certain data and information that had never been asked for before by another agency.
The work laid the foundation for future jianyuan rmbs transactions with a global rating, including one that ccb was offering to investors as asiamoney was going to press. With benefits such as brand recognition and a potential lower funding cost, it is just a matter of time before other originators will follow suit.