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The HKMC introduced the multi-currency, conventional bond
style Bauhinia Mortgage-Backed Securitisation Programme (Bauhinia
Programme) in December 2001. The issuer, Bauhinia MBS Limited
(Bauhinia), is a bankruptcy-remote special purpose company
formed by the HKMC for the purpose of issuing mortgage-backed
securities (MBS) under this programme. From time to time the HKMC
will sell mortgage loan portfolios to Bauhinia, which will
be packaged into MBS of different series for investors.
The programme enables the HKMC to arrange issues in different
currencies and meet with the demands of foreign as well as
domestic investors. The programme adopts a bond style structure
under which the interest amount payable on the coupon date
is pre-determined and known to investors. It will facilitate
the trading of the MBS and hence enhance their liquidity in
the secondary market.
The programme features flexible offering mechanisms that
cater to both public issues and private placements. A dealer
group comprising major financial houses helps to establish
an extensive distribution network and facilitates a wider
distribution of the MBS. The programme is arranged by Merrill
Lynch International. The dealer group includes Barclays Bank
PLC, Citicorp International Limited, DBS Bank (Hong Kong)
Limited, Deutsche Securities Limited, Hong Kong Branch, The Hongkong and Shanghai
Banking Corporation Limited, J.P. Morgan Securities (Asia
Pacific) Limited, Merrill Lynch International and UBS AG.
The HKMC acts as seller, master servicer and transaction administrator
under the programme.
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The Bauhinia Programme is a major milestone in the development
of the secondary mortgage market in Hong Kong. Through standardisation
of product structure and documentation, the programme provides
a platform for both the HKMC and banks to conveniently convert
their illiquid mortgage portfolios into liquid MBS, thereby achieving
their funding and balance sheet management objectives.
The debut MBS issue of HK$2 billion launched under the Bauhinia
Programme was closed in March 2002. It was well received by
the market, with the participation of a wide range of institutional
investors such as insurance companies, pension/investment
fund managers, private and commercial banks. It was the first
MBS issue to offer investors a choice between a Prime-based
or HIBOR-based coupon. The second issue of HK$3 billion launched
in October 2003 was the largest ever Hong Kong dollar denominated
residential MBS transaction in Hong Kong.
In November 2004, the HKMC completed a HK$2 billion MBS issue
under which notes were offered to both Hong Kong institutional
and retail investors, through dealers and placing banks respectively.
This was a groundbreaking issue as it represented the first
MBS ever to be offered to retail investors in the whole of
Asia. The latest issue of HK$1 billion MBS was completed in November 2005, which was well-received by a wide spectrum of institutional investors.
The HKMC will consider applications for Dealers under its Bauhinia MBS Programme Interested banks or financial institutions are welcome to submit their applications to the Treasury Department of the HKMC for consideration.
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