Government Housing Bank, Thailand’s biggest mortgage originator with a 38% market share, has begun discussions with international arrangers for a planned $1 billion-equivalent residential mortgage-backed deal.
According to reliable sources, the list of bidders includes ABN Amro, Calyon Securities, Citigroup, HSBC and Standard Chartered. The banks will over the next month meet with GHB officials to submit proposals.
It is believed GHB wants to sell $750 million of bonds offshore and $250 million-equivalent in the local market, and is looking at a late summer/early fall launch. Domestic securities firms will be involved in the sale of local-currency bonds.
Rumors suggest at least one arranger will advise GHB to bring in a monoline to wrap the deal, ensuring triple-A ratings and better pricing. This, according to some observers, is necessary given the borrower’s non-performing loan issues.
For several years after the Asian Financial Crisis, Thailand was considered a no-go zone for monolines. Bankers say monolines have become more bullish as the economy has rebounded strongly over the past two years. While some argue the political uncertainty that has affected the Southeast Asian country in 2006 could again cause doubt, the quality of assets will ultimately determine monoline participation.
“As offshore investors know little about Thai ABS or mortgages, monoline execution seems to be a good fit for arrangers,” explains one market veteran. “There is a lot of work needed to understand the Thai mortgage sector and ensure good quality information. Political uncertainty should not matter as much as that, because portfolios are usually picked and deals structured with sufficient enhancement to cover difficult periods.”
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