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China Securitization Awards

Best for ABN 2019

Bank of China

The asset-backed notes (ABN) market allows non-financial enterprises to issue securitization deals in the interbank market. Bank of China, more than any other firm, has led market developments.

The bank wrote Rmb30.6 billion ($4.3 billion) of ABNs during the awards period, giving it a 12.4% share of the market, Wind data shows: Everbright Securities ranks second with 8.85%.

Bank of China is not only the largest underwriter in the ABN market, it has also covered a wide range of underlying asset classes, including factoring receivables, e-commerce consumer loans and lease receivables. The bank has acted as the lead underwriter on landmark deals such as the first green tariff receivable rights ABN, the first foreign auto lease ABN and the first ABN to have its floating-rate tranches linked to China’s new benchmark rate, the loan prime rate.

With such a rich experience in the credit ABS market, Bank of China has successfully brought ABS investors into the ABN market. The bank acted as the lead underwriter for BMW’s debut ABN –  Bavarian Sky Leasing 2019-1. The deal was originated by BMW’s subsidiary, Herald International Financial Leasing.

Although BMW has been a frequent issuer in the auto ABS market, its debut ABN deal faced challenges. Herald has a short history of running BMW car leases. Further, S&P Global Ratings has rated the senior tranches of the ABN several notches lower than the senior tranches of the automaker’s most recent auto ABS deal.

However, Bank of China managed to price the senior class-A notes of the auto lease ABN only 2 basis points higher than the corresponding tranche of BMW’s ABS deal, which had been sold just a month earlier. Five months later, BMW’s second ABN deal, also underwritten by Bank of China, achieved even tighter pricing than the first one.

Since the ABN market is relatively undeveloped compared with the exchange and interbank ABS markets, the National Association of Financial Market Institutional Investors, the regulator of the ABN market, still gives out approvals to deals on a case-by-case basis. While ABS products need a few weeks from being structured to being sold to the market, ABN products need months to go through the same process.

Bank of China, as one of the big-four commercial banks in China and the largest underwriter of the ABN market, has extensive experience in communicating with regulatory authorities, a useful advantage.

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