Taipei City planning bond sale

The Taipei City Government plans to sell bonds backed by rental income from the Taipei 101 building and Shinkong Mitsukoshi Department Stores (新光三越百貨) in Hsinyi District, a Taipei finance official said yesterday.

The bond sales will take place by end of this year, said Taipei Bureau of Finance Director Lee Sush-der (李述德). It will pay interest annually and mature in 20 years, he said.

The city is planning to raise a combined fund of NT$3 billion through the bond sales to finance the city's major infrastructure projects, according to Lee.

The business of asset-backed bonds is expanding after the Financial Asset Securitization Statute (金融資產證券化條例) was passed in June last year.

It allows financial institutions to re-package assets -- such as residential mortgages, car loans and credit-card receivables -- and sell them to investors as securities to increase the liquidity.

The city has signed a 70-year and 50-year lease, respectively, with owners of the Taipei 101 and Shinkong Mitsukoshi, which are required to pay rent of NT$110 million and NT$50 million annually to the city government.

The city appears upbeat about its securitization plan.

"Stable cash-flows and well-performing management at both buildings are sure to yield returns to attract bond buyers," Lee said.

The Ministry of Finance has given its go-ahead to the city government's securitization plan, Lee said, adding that the city will soon launch credit-rating procedures and hold road shows within the next few months to attract investors.

An analyst at Taiwan Ratings (中華信評), the local arm of Standard & Poor's, said the city government's securitization plan is in its planning stage and it is too early for Taiwan Ratings to evaluate this plan.

"But we do believe that stable cash flows and well-known building management lay a solid ground for good bond sales in the future," Clementine Kiang (江斐若) said.

A stock analyst who only wanted to be identified by her surname, Wu, yesterday said she expected to see the future stock market to be diversified with innovative financial products in order to re-invigorate the nation's capital markets.

But she also expressed concern that buyers will only invest in well-planned financial products, which are expected to yield high returns, in the newly emerging asset securitization markets where risks are still unclear.

"How interested investors will be in the bond sales depends on how well financial institutions re-package their assets," she said.

Lee yesterday said that the city had commissioned Fubon Commercial Bank (富邦銀行) and TaipeiBank (台北銀行) to help repackage and convert the asset deal into marketable securities for sale to investors.

Following the statute's approval, the Industrial Bank of Taiwan (台灣工業銀行) was the first to pair up with French bank Societe Generale SA and to mould corporate loans into securities in April. Chinatrust Commercial Bank (中國信託銀行) is also set to begin issuing mortgage-backed securities.