KERISMA Bhd, a special purpose vehicle for Alliance Merchant Bank Bhd, will issue RM1 billion worth of asset-backed bonds under a Primary Collaterised Loan Obligations (CLO) arrangement next month.

 
Alliance Merchant Bank manager for debt capital market Marcus C. Ong said the RM1 billion five-year bonds received overwhelming response from investors, having been fully subscribed for when the placement of the bonds was made recently.

 
"The borrowers are expected to get the money from the date of issuance of the bonds, which is expected in June," he told newsmen after the signing of the securitisation of new loan facilities in Kuala Lumpur, yesterday.

 
Alliance Merchant Bank signed an agreement for the loan facilities with Kerisma, Amanah Short Deposits, Alliance Bank Bhd, Nomura Advisory Services (Malaysia) Sdn Bhd, Malaysian Trustees Bhd and 25 borrowers.

 
Alliance Merchant Bank is the lead arranger and Nomura Advisory Services is the technical adviser to the Primary CLO arrangement. Meanwhile, Kerisma was set up to handle the transaction.

 
Under the arrangement, Kerisma's Primary CLO will issue the RM1 billion bonds in the form of RM870 million senior bonds, RM30 million mezzanine bonds and RM100 million subordinated bonds.

 
"The bonds' proceeds will be used by Kerisma to purchase loans from Alliance Merchant Bank. Alliance Merchant Bank will then disburse the funds (from Kerisma) as loans to the corporate borrowers," he said.

 
On an ongoing basis, the servicing of the coupons and redemption of the bonds by Kerisma will be backed by cash flows from the loan assets, which consist of interest collections and principal repayment from the corporate borrowers.

 
Alliance Merchant Bank has already secured the approval from the Securities Commission for the transaction, the largest securitisation to be completed so far this year.

 
In fact, Ong said, it is the largest-ever securitisation made by any merchant banks in the country.

 
In view of the encouraging response, Ong said the bank plans to have similar Primary CLOs but could not ascertain how many more of such an arrangement and when would the next be made.

 
"Several proposals are in the pipeline, but I would not be able to tell when the next CLO is. It is normally difficult to close one deal with one borrower under such an arrangement because of the huge amount involved.

 
The earliest would be in six months," he said.

 
Ong said the Kerisma Primary CLO was structured to facilitate companies which intend to access the debt capital market for long-term financing but find it uneconomical to do so due to relatively small funding and the associated uneconomical upfront costs.

 
"Through Primary CLOs, the borrowers are basically able to reap the benefits of economies of scale and, at the same time, obtain competitive pricing for their loans, which have been structured to stimulate long-term financing, such as a bond issue," he said.

 
Ong said the Kerisma Primary CLO is expected to contribute to the evolution in the development of securitisation in Malaysia, especially with respect to collateralised debt obligations.

 
Meanwhile, Alliance Merchant Bank senior general manager Foo Kok Siew said the securitisation transaction underscores the continued development of the Malaysian securitisation and debt capital markets.

 
Accordingly, he said, the deal highlights the importance of the securitisation market in Malaysia which is growing and striving to match issuer and investor demand that remains unfulfilled through the traditional loan and debt markets.

 
Under the transaction signed yesterday, Alliance Merchant Bank created 25 new loans to be given to 25 companies, representing 16 different type of industries.

 
"These companies come from a wide range of business backgrounds and differ in many characteristics from size and history to credit strength.

 
But, they are strong and forward-looking," Foo said.

 
Among them are Halim Mazmin Bhd, Ayamas Food Corp, Nepline Bhd, Bolton Holdings Bhd and BIG Industries.