Cosmos Bank Taiwan (
The bonds, which have an expected average life of 1.1 years and a legal maturity of six years, were priced at 93 basis points above 1-month US dollar London Interbank Offered Rate, or Libor, said Anthony Cutcliffe, head of structured debt in Asia for UBS AG. HVB Group also managed the sale.
"We chose this new product instead of convertible bonds to avoid increasing our equity in case investors decide to convert their bonds, so that earnings won't be affected," Cosmos Bank's Executive Vice President Shih Kung-liang (
The transaction is Taiwan's first overseas sale of asset-backed securities since it passed the Financial Asset Securitization Law (金融資產證券化法) in June last year, allowing the repackaging of assets such as residential mortgages, car loans and credit-card receivables. Cosmos Bank will use the proceeds from the sale to invest in US dollar-denominated assets, Shih said.
Cosmos has Taiwan's largest domestic cash-advance card business controlling about 55 percent of the nation's total outstanding balance, according to Moody's Investors Service, which assigned the US dollar-denominated bonds its Aa3 rating, the fourth-highest investment grade. Standard & Poor's rated the bonds AA-, its fourth-highest rating.
"It's the first cross-border ABS deal out of Taiwan so we took comfort from the in-house credit enhancements and the mechanism of the structure itself," said Marie Lam, an analyst with Moody's Investors Service in Hong Kong. Some real estate and consumer finance companies may also be looking to sell asset-backed loans, she said.
The company also sold NT$1.2 billion (US$35 million) of notes to investors in Taiwan, half its initial target. The domestic bonds offer holders any excess spread after the foreign bondholders are paid.
Cosmos has a market value of NT$32.2 billion (US$947 million). The lender charges 18.25 percent annual interest on cash advances, with interest accruing from each transaction.
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