Shinkong Life to handle securitization issue

Shinkong Life Insurance Co (新光人壽) said yesterday that it had signed an agreement with the Industrial Bank of Taiwan (IBT, 台灣工銀) to arrange the insurer's issuance of securities backed by its service apartment -- Jasper Villa (傑仕堡) in Taipei's Tienmu district.

Shares may be sold to the public as early as the second quarter, the nation's third-biggest life insurer said.

"We plan to launch NT$5.5 billion worth of beneficiary shares backed by Jasper Villa as early as the second quarter," said Reghpa Wu (吳章偉), executive vice president of Shinkong Life.

Wu was upbeat about the company's issuance of property-based securities, given that the villa has generated a fixed rental income of NT$300 million annually for the past eight years.

"The villa's occupancy rate stands at 98 percent," he said.

Despite the news, shares of Shin Kong Financial Holding Co (新光金控), the parent of Shinkong Life, dropped NT$0.4 to close at NT$32.5 on the TAIEX yesterday.

The legislature passed the Financial Asset Securitization Law (金融資產證券化法) in 2002, which allows the repackaging of assets such as residential mortgages, car loans and credit-card receivables.

The proceeds from the transaction are expected to help the prospective issuer boost capital and diversify investments.

If NT$5.5 billion is raised, Wu said that the insurer's reserve capital will jump from NT$687.5 billion to NT$693 billion, which will be used to either re-invest in the local real-estate market or to fund the company's other re-investments.

But he stressed that the Jasper-based securities will be a "differentiated" investment target to attract investors since most yet-to-be-launched securities are backed by office buildings.

The property sector's future securitization plans, including Shinkong's plan, will be one of the major stimuli to boost the economy and the real-estate sector in particular, Wu said.

In December last year, Far Glory Group (遠雄集團) signed an agreement with the Industrial Bank of Taiwan and the Land Bank of Taiwan (土地銀行) to arrange the group's issuance of securities backed by its headquarters building in Taipei's Hsinyi district.

Company chairman Chao Teng-hsing (趙藤雄) said at that time that it planned to launch NT$3 billion in seven-year beneficiary shares backed by the group's Far Glory International Center (遠雄國際中心) in the middle of this year.

"With an estimated market value of NT$6 billion and a 100 percent occupancy rate, the Far Glory International Center has an annual fixed rental income of NT$240 million, or a 4 percent rate of return," Chao told the Taipei Times at the time.

Allen Hsu (徐鳳麟), a manager with the DTZ Debenham Tie Leung International Property Advisor, said yesterday that Jasper's fixed-rental income should be a selling point to attract investors if the securities guarantee at least a 5 percent return.

Hsu also expressed a bullish view of the new securitization market, in which risk is low, since most capital is sitting idle with a low return as a result of low interest rates.

"Investors may become less interested if the interest rates rise, which is unlikely this year," Hsu added.