The China Development Bank (CDB), in December, launched the first collateralized loan obligation in the country, according to Fitch Ratings. The China Development Bank 2005-1 CLO is a Chinese yuan-denominated securitization backed by a pool of loans originated and serviced by CDB. The issuer is a special-purpose trust incorporated under China's securitization rules enacted last year. Chinese regulators want to advance structured finance through two pilot securitization programs and hope their designs, execution and performance will help guide more deals this year. The Chinese Construction Bank issued an MBS of 3.1 billion yuan, about $382 million, earlier in the year.
One U.S. portfolio manager is optimistic this could lead to the opportunity of U.S. investors raising money in China. "I would love to go to China and see if we could raise money," he said. He admitted it may take a few years before U.S. investors can enter the market, but likened it to the current relationship with Japan and Japanese investors.
According to Charles Chang, a Fitch director of credit products, Asia, China will attempt to launch a few more structured products this year, although the ratings agency is not sure how many. He said he thinks CDB is in the process of doing a second CLO, but does not know the status of it. "The two pilot programs that have been launched are a first attempt to develop a structured finance market," he said. "It indicates the government has realized this is an important part of the market."
According to Fitch, the total portfolio of the China Development Bank, 2005-1 CLO is CNY4.2 billion with 51 mid-long-term corporate loans. It is set to mature in July 2007. Most of the loans are concentrated in the telecommunications, energy, utilities and transportation sectors. China Credit Trust Co. will act as the trustee of the portfolio. An email to the China Development Bank was not answered.