The Asian loan market is having a tough time at the moment. The amount of money borrowed by Asian companies and banks in the first quarter of this year was almost half of what they raised in the same period of 2011. But the woes of the loan market hardly compare to the depression that structured finance bankers have suffered since the credit crunch.
The whiz kids who were working hard to bring securitisation to Asian funding officials a few years ago have seen big knocks to potential demand and supply. The structured investment vehicles and conduits that used to provide a good source of demand for securitisations from the region are long gone and the growth of Asias bond markets both domestic and offshore has made securitisation technology less necessary for riskier borrowers.
Structured finance bankers made a strong effort to rebuild the market last year, closing deals for companies including CapitaLand, Korean Airlines and Shinhan Card. But it is only recently that things have really started to look up, after syndicate officials turned more fully to traditional bank lenders to generate demand for securitisations. That could be the way forward for structured finance in Asia.
Electronics and furniture retailer Courts (Malaysia) managed to raise MR300m ($97.26m) earlier this month, after sole bookrunner HSBC decided to follow up on the demand it found from bank lenders for a commercial mortgage-backed deal for CapitaLand in 2011.
Philippine Airlines also turned to bank lenders to increase a $50m borrowing it had outstanding and plenty more companies are now working on bilateral deals structured in loan format.
The experience of South Koreas Asana Airlines, which attracted around 20 asset managers for a recent $370m deal, shows that bank lenders are not the only option for companies hoping to securitise some of their assets. But that deal had a guarantee by Korea Development Bank, a well-known and well-respected borrower in the international bond market. When such guarantees are not present, bond investors are unlikely to be so welcoming to asset-backed deals.
Instead, the Philippine Airlines loan may set the template for other securitisations in Asia. The transaction was initially structured as a $50m bilateral loan with Credit Suisse, and was backed by credit card payments made by passengers flying from the US. That extra security made it easier for Credit Suisse to push the deal through its credit committees but it also meant that when the company decided to increase the loan, the Swiss bank had already done the necessary work to make it attractive to a wider range of lenders.
Structured finance bankers admit that a lot of their time is now being spent on bilateral deals, making it much more certain that borrowers will get the money they need. But for those companies who have hit their credit limits at individual lenders, cannot find other sources of funding, or simply want to diversify their investor base, these bilaterals could soon make way to asset-backed deals distributed on a club or syndication business.That is good news for structured finance bankers in the region, who have been slowly working to bring volumes back up since the market imploded in 2008. But it will also help loans bankers generate deals for companies that may not have been able to access lenders before but now can. Thanks to securitisation technology, everyone might be a winner.