- Analysis of RMBS underlying assets. The underlying assets of RMBS have the characteristics of high dispersion, long remaining period, good credit quality, high mortgage rate, and a high degree of homogeneity. When analyzing the underlying assets, in addition to analyzing the static asset pool, it is also necessary to focus on the default rate, loss rate, early repayment rate indicators, and related influencing factors.
- Analysis of RMBS transaction structure. The transaction structure of RMBS is similar to that of general credit securitization products, and the analysis should focus on the impact of the trigger mechanism on the cash flow distribution sequence. In terms of credit enhancement measures, RMBS mainly adopts credit enhancement measures such as excess interest spread, over-collateralization, setting of reserve accounts, repayment during the package period, mandatory redemption clauses, and arrangement of priority/secondary tranches.
- RMBS risk concerns. Focus on underlying asset-related risks, transaction structure risks, and contract performance risks of participating institutions. The risks related to underlying assets include the credit risk, regional risk, interest rate risk, and national real estate policy regulation risk of underlying assets; transaction structure risk focuses on mortgage change risk, offset risk, and confusion risk. The performance risk of participating institutions focuses on the performance capabilities of loan servicers.
- Review of the inter-bank asset-backed securitization market in November: the total amount of inter-bank credit asset-backed securities issued steadily increased, and RMBS continued to lead the way; the average value of the issuance rate of priority A and priority B and the short-term and medium-term bill spreads were 23bp and 65bp respectively, the current level of interest spread has a certain allocation value; in the secondary market, the transaction scale of inter-bank asset-backed securities increased significantly in November, indicating that the liquidity of inter-bank asset-backed securities improved with the increase in transaction scale.
- Review of the asset securitization market of the exchange in November: the issuance scale of ABS on the exchange increased slightly, and the issuance amount of accounts receivable ABS hit the highest in a single month; the interest rate difference between the priority A, B, and corporate bonds was 168bp and 259bp respectively, and the interest rate difference was relatively high. The allocation value is prominent; in the secondary market, the total transaction value of the Shanghai Stock Exchange decreased by 65.28% year on year, and the total transaction value of the Shenzhen Stock Exchange increased by 80.67% year-on-year.
- Hot spots in the asset securitization market in November: 1) ABS supervision continued to be strengthened: Shanghai Stock Exchange and Shenzhen Stock Exchange issued the “Notice on Matters Concerning the Submission of Asset-Backed Securities Credit Risk Management Reports in the Second Half of 2018”, requiring managers to report Submit asset-backed securities credit risk management reports. 2) The types of ABS products are further enriched: the first scenic spot ticket revenue right ABN in the inter-bank market was successfully issued; the first public talent rental housing Reits in the country was successfully issued in the first phase; the first affordable public rental housing ABS was successfully issued; the first NEEQ listed The company’s water supply charging right ABS was successfully issued; the first ABS product on the life service e-commerce platform was successfully approved.
- Risk warning: 1) The ABS financing policy was tightened more than expected; 2) There were frequent credit risk events, ABS financing was blocked, and the issuance interest rate rose sharply.
1. One article to understand personal housing mortgage-backed securities
In recent years, personal mortgage asset-backed securities (“RMS” for short) have developed rapidly. Since 2018 [1], RMBS has issued 572.959 billion yuan, accounting for 62.63% of the total issued amount of credit asset-backed securities. RMBS has become an inter-bank An important part of the credit asset securitization market. This article makes an in-depth analysis of RMBS’s underlying assets, transaction structure, credit enhancement measures, and risk concerns for investors’ reference.
1. What are personal mortgage-backed securities?
Personal residential mortgage asset-backed securities (“RMBS”) refers to the trust of personal residential mortgage loans to a trustee in the form of asset-backed securities by a banking financial institution or provident fund management center in China. It is a securitization financing tool that issues beneficiary securities to investment institutions and pays the income of asset-backed securities with the cash generated by the individual’s residential mortgage loan. The personal housing mortgage loan as the basic asset is that when the borrower purchases, builds or repairs a house, the purchased house and other property with ownership are used as mortgage or pledge, or a third party provides a guarantee for its loan and assumes joint and several liabilities, and submits it to the bank. Or a loan method applied by the Housing Provident Fund Management Center. Personal housing mortgage loans include commercial personal housing mortgage loans, provident fund housing mortgage loans, and personal housing portfolio loans.
For the initiators of RMBS, the main role of personal housing mortgage securitization is to revitalize the stock assets, improve the efficiency of asset use, reduce the risk of the banking system and the liquidity risk of the provident fund management center. Specifically, for commercial banks, the issuance of RMBS can realize the release of bank risk assets, revitalize residential mortgage loans and free up credit lines under the control of bank credit scale and other regulatory conditions, which will help banks improve asset utilization efficiency. ; For the Provident Fund Management Center, issuing RMBS can alleviate its liquidity risk. In some areas, the number of provident fund loans and withdrawals has grown, and there has been a phenomenon that the provident fund’s cash flow cannot make ends meet, and the liquidity is relatively tight. The use of provident fund RMBS to activate rapidly existing funds can alleviate the liquidity risk of provident fund funds.
From the investor’s point of view, RMBS’s pooled assets are highly dispersed, and the issuance rate and short-term financing medium-term notes usually have a certain spread, and there is a certain allocation value.
2. The development history of RMBS in my country
Since China launched the pilot credit asset securitization in 2005, two RMBS products were successfully issued in 2005 and 2007, respectively, the first phase of Jianyuan 2005 personal housing mortgage loan asset-backed securities initiated by China Construction Bank Co., Ltd. He Jianyuan 2007 Phase 1 Personal Housing Mortgage Loan Asset-Backed Securities. In 2008, the RMBS business was temporarily suspended due. It was not until 2014 that my country re-issued the third RMBS product, the Postyuan 2014 first phase of personal housing mortgage loan asset-backed securities initiated by Postal Savings Bank of China Co., Ltd. Since then, the number of RMBS issuance periods and the total issuance amount have grown rapidly.
Beginning in 2015, the circulation of RMBS began to increase. From 2015 to 2018, RMBS issued 10, 20, 19, and 54 issues respectively. The issuance scale increased from 32.943 billion yuan in 2015 to 572.959 billion yuan in 2018, with a compound annual growth rate of 159%. In recent years, the proportion of RMBS issuance in the total issuance amount of credit asset securitization has also been increasing. In 2015, the total issuance scale of RMBS accounted for 8.12% of the total issuance scale of inter-bank credit asset securitization. In 2018, the proportion has increased To 62.63%, RMBS has become an important part of the inter-bank credit asset securitization market.
In 2018, a total of 54 RMBS products were issued, with an average issuance amount of 10.8 billion yuan in a single period. Among them, the twenty-first phase of Jianyuan’s 2018 personal housing mortgage asset-backed securities issued by China Construction Bank was the largest, reaching 168 billion. From the perspective of the initiators, China Construction Bank Co., Ltd. has issued a lot, with a total of 22 issues of RMBS products, with an issuance scale of 242.1 billion yuan, followed by Industrial and Commercial Bank of China (diagnostic stocks ) Co., Ltd., with a total of 16 issues of RMBS products, with a total issuance scale of RMB 204.2 billion. From the perspective of priority ratio, the priority ratio of each RMBS product is relatively balanced, with an average of 87.10%.4.76 -0.42%
3. Analysis of the underlying assets of RMBS
3.1. Characteristics of RMBS underlying assets
Compared with other types of credit asset securitization, RMBS underlying assets have the characteristics of high dispersion, long remaining period, better credit quality, high mortgage and pledge rate, and a high degree of homogeneity. The average number of RMBS transactions in the pool is 36,354, and the degree of dispersion of underlying assets is much higher than that of other types of credit securitization products. Specifically:
The remaining term of the loan for the underlying assets of RMBS is longer. Among the issued RMBS products, the weighted average remaining maturity of loans is 122.09 months, which is greatly affected by the macro environment. In general, the longer the maturity, the greater the external risk faced by the borrower and the possibility of default. The higher it is, the housing loan generally adopts a floating interest rate method. The longer the term, the greater the uncertainty about the impact of market interest rate fluctuations on the pooled assets.
The mortgage and pledge rate of RMBS underlying assets is relatively high. Personal housing mortgage loans have the purchased house and other property with ownership as mortgage or pledge. In general, the higher the mortgage and pledge rate, the higher the recovery rate, and the borrower will. In the event of a default, the bank or provident fund management center can reduce losses by disposing of the collateral.
The credit quality of RMBS’s underlying assets is good. Generally speaking, the non-performing rate of personal housing mortgage loans is much lower than other loans, so personal housing mortgage loans are high-quality loans of banks, and its inherent low risk also makes the loan interest rate generally lower than the interest rate of other loans.
The basic assets of RMBS have a high degree of homogeneity. The contract terms of individual residential mortgage loans are relatively similar, and the homogeneity of mortgage loans is relatively high, which makes residential mortgage loans a better underlying asset for securitization. and some qualitative factors to establish a historical default model to assess the credit risk of its underlying assets.
3.2. What is the difference between commercial RMBS and provident fund RMBS?
RMBS is mainly issued in the inter-bank market, and the initiators are mainly divided into commercial banks and local housing provident fund management centers. As of December 18, 2018, a total of 99 commercial RMBS and 7 provident funds RMBS have been issued in the inter-bank market, with a total issuance size of RMB 882.641 billion and RMB 41.677 billion respectively.
The underlying assets of provident fund RMBS and commercial RMBS have the characteristics of high dispersion, long remaining period, and a high degree of homogeneity. However, compared with commercial RMBS, provident fund RMBS also has the following differences:
Housing provident fund loan overdue rate is lower. Compared with ordinary commercial housing loans, the housing loan procedures of provident funds are more complicated, and the requirements are more stringent, and there are requirements for the upper limit of the loan amount; at the same time, the borrower’s provident fund payment has a certain coverage effect on the loan balance. The overdue rate of RMBS is generally lower than that of commercial RMBS.
The prepayment rate of housing provident fund loans is relatively low. The loan interest rate of housing provident fund loans is generally lower than that of commercial housing loans, so borrowers are not willing to repay in advance. Under normal circumstances, the prepayment rate of housing provident fund loans is lower than the prepayment rate of commercial housing loans.
The regional concentration of basic assets of provident fund RMBS is higher, and the regional characteristics are more obvious. The borrowers of provident fund loans are generally used to purchase local housing, so the pooled loans are generally concentrated in the same city, and the regional concentration is generally higher than that of commercial housing loans. Provident fund housing loans have strong regional characteristics. Therefore, when analyzing the risks of provident fund loans, it is necessary to pay attention to the development of the local economy and the real estate industry.
The weighted average lending rate is lower. Generally, the first housing provident fund loan is subject to the provident fund loan benchmark interest rate, and the second housing loan interest rate has been increased. On the whole, the provident fund loan interest rate is lower than the commercial housing loan interest rate.
Compared with commercial RMBS, provident fund RMBS generally has a variety of credit enhancement measures in the transaction structure. Provident fund RMBS has a certain negative interest spread pressure due to low asset-side interest rates and long loan terms. To alleviate this negative interest spread pressure, some additional credit enhancement measures are usually set up, such as setting up over-collateralization and extending the package period of securities and other credit enhancement measures.
Provident fund loans may have secured assets rather than collateralized assets. Some provident fund management centers in China need a guarantee company to provide guarantees when issuing loans. ), each loan in its underlying assets is in the form of a “home purchase guarantee” that assumes joint and several guarantee liabilities, and individuals use the purchased house as collateral to provide a counter-guarantee to the “home purchase guarantee”. At this time, it is necessary to pay attention to the credit risk of the guarantor.
3.3. Analysis method of RMBS underlying assets
Due to the large number of underlying assets involved in RMBS and the high degree of decentralization, it is difficult to evaluate each loan of the underlying assets one by one. Therefore, the historical data of the static asset sample pool is generally analyzed, and the focus is on the factors that affect the credit status of the asset pool. Indicators such as default rate, loss rate, and early repayment rate are used to analyze the overall credit of the asset pool.
3.3.1. Historical analysis of static asset sample pool
Rating agencies generally construct static sample pools based on historical data provided by original stakeholders to estimate the credit status of asset pools to be securitized. By analyzing the historical data of the sample pool, the loan status transition is calculated, and then the expected default rate and expected loss rate of the asset pool are estimated. Generally speaking, the more historical data and the longer the span of the static sample pool, the higher the degree of simulation of the asset pool to be securitized. However, it should be noted that there are slight differences between the static sample pool and the asset pool to be securitized in terms of interest rates, terms, and macro conditions, which will lead to differences in the estimated results. Therefore, in practice, the parameters need to be adjusted appropriately.
3.3.2. Analysis of important indicators of underlying assets
In addition to analyzing the static asset pool, RMBS basic assets also need to focus on indicators such as default rate, loss rate, and early repayment rate. By analyzing the static asset pool, the expected default rate can be estimated. At the same time, we also need to pay attention to factors such as the age distribution of borrowers, initial loan-to-value ratio, loan age, remaining maturity, regional concentration, loss rate, and early repayment rate. impact on default rates.
3.3.3. Collateral and Guarantee
The value of loan guarantees and collateral, as well as transfer registration and disposal issues, have a significant impact on the loss rate. First, according to the “Guarantee Law”, the urban real estate mortgage property adopts the principle of registration requirements, that is, the mortgage registration is the effective requirement for the mortgage right. At present, the Ministry of Construction has especially issued the “Trial Notice on Issues Concerning the Registration of Mortgage Rights Changes Involved in the Securitization of Personal Housing Mortgage Loans”, allowing the originator and the trustee to jointly apply to the relevant real estate management departments for batch processing of related personal housing mortgage loans Procedures for the registration of changes in subordinated mortgage rights. However, the incomplete transfer of mortgage rights and mortgage pre-registration rights may affect the recovery progress and amount of the creditor’s rights, resulting in losses. Secondly, about the disposal of mortgages, if the debtor fails to perform the debt when the period for the performance of the personal housing mortgage loan expires, the commercial bank will obtain repayment through the disposal of the mortgage. The mortgage can be realized by either discounting the mortgaged property, auctioning off, or selling the mortgaged property through an agreement with the mortgagor or judicial relief. If they are in the same order of repayment, they shall be repaid in proportion to the creditor’s rights. Finally, you need to pay attention to the guarantor guarantee. In addition to real estate mortgages, provident fund loans also take the form of guarantor guarantees. The assets entering the pool are loans in the form of guarantee guarantees, and attention should be paid to the credit of the guarantee subject.
4. Analysis of the transaction structure of RMBS
4.1. Basic Transaction Structure
The transaction structure of RMBS is similar to that of general credit asset securitization products. We take 18 Jianyuan 1 as an example to briefly introduce the transaction structure of RMBS.
As the originator, China Construction Bank entrusted some individual housing mortgage loans as trust property to the trustee, and with CCB Trust Co., Ltd. as the trustee, set up a special purpose trust and issued RMBS to investors. The issuer, the originator, and the lead underwriter Sign the “Lead Underwriting Agreement”, and the lead underwriter will then sign the “Underwriting Syndicate Agreement” with the members of the underwriting syndicate to form an underwriting syndicate to sell the asset-backed securities (except the asset-backed securities issued to the originator). CCB Capital Management Co., Ltd. provided financial advisory work for the entire trust project. During the validity period of the trust, the trustee entrusts the loan service institution to manage and service the daily recovery of the trust property. For the cash flow generated by the trust property, the trustee entrusts a fund custodian institution to provide fund custody services.
4.2. Cash flow distribution mechanism
The cash flow distribution order of RMBS products is roughly the same as that of general credit securitization products, mainly including:
(1) taxes and fees.
(2) remunerations of participating institutions
(3) repayment of senior securities interests according to the priority order.
(4) Repay the principal of the senior securities in the order of priority
(5) Repay the principal and interest of the subordinated securities. The cash flow distribution sequence of different products is similar, so it is necessary to analyze specific products in the analysis.
5. Analysis of credit enhancement measures for RMBS
5.1. Setting of Priority/Secondary Structure
The hierarchical structure is the most basic credit enhancement method of ABS. Similarly, RMBS products also carry out internal credit enhancement by designing a priority substructure. In general, the higher the thickness of the subordinated securities, the higher the credit support for the senior class. However, when the underlying assets default seriously, the senior securities still face the risk of loss of principal and interest. The average priority of RMBS products issued in 2018 was 87.10%.
5.2. Reserve Account Settings
A reserve account is generally set up in RMBS products, a “trust (tax) reserve account” is generally set for commercial RMBS, and a “trust (service transfer and notification) reserve account” is generally set for provident fund RMBS. Some RMBS have both a trust (tax) reserve account and a trust (service transfer and notification) reserve account.
5.3. Mandatory Redemption Clause
In some provident fund RMBS products, to alleviate the risk of negative interest rate spread, the product is designed with mandatory redemption of substandard assets, which improves the default recovery rate to a certain extent and increases the credibility of the underlying assets. However, it should be noted that the credit enhancement effect of the redemption clause is related to the credit rating of the originator. When the credit rating of the originator is much lower than that of the senior securities, the credit enhancement effect is average.
5.4. Overcollateralization
Over-collateralization refers to the part of the balance of the asset pool that exceeds the principal amount of the asset-backed securities, and the collections generated by the excess loan assets will be used to make up for the loan default losses and the lack of interest collections due to low-interest loans. Provident fund RMBS may have the risk of negative interest spread, so it generally sets up over-collateralized credit enhancement measures to cover the payment of principal and interest of securities. When the repayment rate of the principal balance of the issued asset-backed securities is faster than the repayment rate of the loan principal, the proportion of over-collateralization relative to the balance of the asset pool will gradually increase.
5.5. Excess spread
The difference between the weighted average interest rate of the asset pool and the coupon rate of the senior securities after deducting the relevant issuance costs is the excess spread. General commercial RMBS will set excess spread to provide credit support for senior securities. Due to the risk of negative spread between the asset side and the issuer of provident fund RMBS, the effect of excess spread is not obvious. On the whole, the excess spread of RMBS is generally small and the credit support provided is limited.
5.6. Trigger mechanism arrangement
The triggering arrangement is generally designed in the RMBS transaction structure. Once the triggering event occurs, the triggering mechanism will be activated and the cash flow distribution sequence will be rearranged. RMBS products include accelerated settlement events, rights improvement events, and default events, and most RMBS products include accelerated settlement events and default event triggering arrangements. The design of the trigger mechanism can alleviate the risk of senior securities to a certain extent and provide them with certain credit support.
6. Risks of RMBS
6.1. Risks related to the underlying assets
Underlying asset credit risk mainly focuses on indicators such as default rate, loss rate, and prepayment rate. Due to the longer loan period of the assets in the pool, the debtors of the assets in the pool are greatly affected by external influences, and the cash flow has great uncertainty. By using the static asset pool to simulate the securitization asset pool, the default probability distribution is estimated by analyzing the historical data, and at the same time, the parameters are adjusted according to some qualitative factors to better reflect the credit risk in the asset pool. The biggest factor in determining the loss rate is the credit rating of the collateral or the guarantor. The higher the value of the collateral, the better the development prospects of the real estate in the region, and the lower the loss rate. Therefore, we should focus on the fluctuation risk and risk of the value of the collateral (real estate). Macroeconomic changes; at the same time, some provident fund RMBS assets in the pool are guaranteed assets, guaranteeing that the guarantor bears joint and several liabilities, so it is necessary to pay attention to the credit of the guarantor, and its credit rating is negatively correlated with the loss rate. Due to the long-term of RMBS assets in the pool, the phenomenon of early repayment is common. Borrowers repay in advance, on the one hand, it can reduce the securities default rate, but on the other hand, it will reduce the inflow of future cash flow, thereby reducing the income of investors; When analyzing, you can pay attention to whether the transaction structure has early repayment risk mitigation clauses.
Regional risk. The RMBS pooled assets are relatively concentrated, and the regional concentration of the basic assets of the provident fund RMBS is higher than that of the commercial RMBS, and the regional characteristics are more obvious. The development of the regional real estate industry may be affected by market conditions, relevant policies, residents’ income levels, and the overall development of the economy. Slowing population growth and headwinds such as natural disasters could also increase the likelihood of borrowers defaulting.
Interest Rate Risk. The price of RMBS during its duration will be affected by interest rates. Affected by the macroeconomic situation and national monetary policy, there are certain fluctuations in market interest rates. At the same time, the interest rate is also a major factor affecting prepayment. Generally, the lower the interest rate, the higher the prepayment rate.
National real estate policy regulation risk. Relevant national policies will directly affect real estate prices, which may lead to fluctuations in the value of collateral in the RMBS asset pool.
6.2. Transaction Structure Risk
The risk of transaction structure mainly includes the risk of changing the mortgage right, offsetting risk, mixing risk, the risk of the absence of backup service agencies, etc., with the emphasis on the risk of changing the mortgage right. After the trust takes effect, due to the failure to go through the registration procedures for the transfer of mortgage rights when individual notification events are triggered and the mortgage rights need to be transferred to the trustee, the transfer registration procedures may not be completed due to various reasons, and the trustee may not be able to complete the transfer registration procedures. Dispose of the mortgage in a timely and smooth manner, resulting in the loss of trust property. Some provident fund RMBS assets in the pool include combined loans jointly issued by commercial banks and provident fund management centers. If the combined loans are pooled, the issue of mortgage ownership may be involved.
Offset risk refers to the risk of loss to the trust property that has been transferred to the trust institution by the debtor of the pooled assets exercising the right of offset against the original owner of the asset by the law. Therefore, in response to this risk, attention should be paid to whether the transaction structure has mitigation measures to prevent and offset the risk.
Confusion risk refers to the risk that the loan service structure confuses the trust property with its property. Once it goes bankrupt, the trust property may suffer losses. Therefore, attention should be paid to the credit level and risk control level of the loan servicer.
The risk of vacancy of a backup service agency refers to the risk of loss of trust property if the service agency is incompetent or voluntarily resigns during the existence of the asset-backed securities. Whether a backup service agency has been pre-arranged in the transaction structure to mitigate this risk.
6.3. Participating institution’s performance risk
Participating institutions mainly include credit enhancement institutions, loan servicers, trustees and fund custodians, etc., focusing on the performance capabilities of loan servicers. The risk control ability of the loan servicer and the due diligence of the loan service directly affect the cash flow inflow of the pooled assets. Loan service institutions should establish strict risk control systems and loan collection systems, and at the same time should have strong collateral disposal capabilities. Attention should be paid to the historical risk management performance of the servicer and its performance record as a loan servicer for the credit asset securitization project.
In conclusion, the development of RMBS in the United States is quite mature. my country’s commercial banks have a large stock of personal housing loans, and the cash flow of the provident fund management center is increasingly tight. There is a large room for RMBS to develop. The investment analysis of RMBS can follow the basic framework of “basic assets-transaction structure-credit enhancement measures”.
First, analyze the underlying assets. In addition to estimating the asset pool to be securitized by analyzing the static asset pool, it is also necessary to focus on the default rate, loss rate, and early repayment rate indicators. Focus on factors that affect default, loss, and prepayment rates, such as initial loan-to-value ratios, collateral drop-in ratios, debt-to-income ratios, borrower characteristics, and fluctuations in the value of the collateral. In addition to credit risk, it is also necessary to pay attention to regional risk, interest rate risk, and national real estate policy regulation risk.
Second, analyze the transaction structure. It is necessary to pay attention to the impact of different trigger mechanisms on the distribution of cash flow, and at the same time, to pay attention to risks such as mortgage change registration.
Finally, analyze credit enhancement measures. RMBS mainly adopts internal credit enhancement methods, such as priority/subordinate structure design, over-collateralization, excess interest spread, setting of reserve accounts, mandatory redemption clauses, trigger mechanisms, and other credit enhancement measures. When investing in RMBS, it is also necessary to focus on the initial loan-to-value ratio (LTV), fluctuations in the value of the collateral (real estate) and related ownership issues, and the risk control capability of the loan servicer.
1. Review of the primary market of interbank credit asset securitization
1.1. The total amount of issuance increased steadily, and RMBS continued to lead the way
In November 2018, a total of 23 credit asset-backed securities were issued between banks, with a total issuance scale of 161.180 billion yuan, an increase of 21.05% in the number of issuance periods compared with the same period last year, while the total issuance periods %. Among the underlying assets, the issuance volume of personal housing mortgage loan RMBS is far ahead, with a total of 9 issuances of 102.122 billion yuan, an increase of 80% over the same period last year, and an increase of 88.23% in the total issuance, continuing the high growth since the beginning of the year situation.
1.2. The average value of the issuance interest rate of priority A and priority B tranches and the short-term financing medium-term bill spreads are 23bp and 65bp respectively.
In November 2018, the interest rate spread between the issuance rates of inter-bank credit ABS priority A and priority B tranches and comparable short-term and medium-term bills has declined compared with the beginning of the year. For investors with short-duration operations, the current spread level still has a certain allocation value.
2. Review of the primary market of interbank asset-backed bills
In November 2018, a total of 15 products of inter-bank asset-backed bills were issued, with a total issuance amount of 19.71 billion yuan. From the perspective of basic asset types, the issuance scale of ABNs based on the right of receipt of notes and lease claims is relatively high, accounting for 31.71% and 24.39% of the total scale of ABN issuance in November. Compared with the inter-bank credit asset-backed securities, the issuance scale and number of issues of asset-backed notes in November were 12.23% and 65.22% of the latter, respectively. The asset-backed note issuance is still relatively rare.
3. Review of the secondary market of interbank asset-backed securities
In November 2018, a total of 363 million interbank asset-backed securities were traded, with a total turnover of 34.070 billion yuan. Compared with the same period of last year, the number of transactions and the number of transactions increased by 40.42% and 41.34% respectively, and the transaction scale increased significantly, which reflects that the liquidity of inter-bank asset-backed securities improved with the increase in transaction scale.
1. Review of the primary market for asset securitization on exchanges
1.1. The issuance scale increased slightly, and the issuance of accounts receivable ABS hit the highest in a single month
In November 2018, the Exchange issued a total of 93 ABS products, with a total issuance amount of 139.933 billion yuan. The underlying assets of corporate ABS products issued in November include accounts receivable, small loans, lease rentals, corporate claims, etc. Among them, accounts receivable ABS has the highest issuance amount, accounting for 39.95% of the total issuance amount. Specifically, accounts receivable ABS issued a total of 42 products in November, with an issuance amount of 55.905 billion yuan, the highest monthly issuance amount.
1.2. The spread between the priority A, B, and corporate bonds is 168bp and 259bp respectively
In November 2018, the interest rate spread between the corporate ABS priority A tranche and corporate bonds of the same level was 168bp, while the interest rate difference between the priority B tranche and corporate bonds of the same level was 259bp. The interest rate spread between corporate asset securitization products and corporate bonds is more obvious, and the allocation value is prominent.
2. Review of the secondary market of exchange asset-backed securities
In November 2018, there were 308 transactions on the Shanghai Stock Exchange, with a total transaction value of 9.884 billion yuan, a decrease of 65.28% compared with the same period last year; a total of 57.4477 million transactions were sold on the Shenzhen Stock Exchange in November, with a total transaction value of 5.468 billion yuan, a decrease from last year. Compared with the same period, it increased by 80.67%.
4. Hotspots in the asset securitization market in November
1. ABS supervision continues to strengthen
On November 8 and 9, 2018, the Shanghai Stock Exchange and the Shenzhen Stock Exchange successively issued the “Notices on Matters Related to Doing a Good Job in the Reporting of Asset-Backed Securities Credit Risk Management Reports in the Second Half of 2018” “. The notice requires the manager to submit the asset-backed securities credit risk management report for the second half of 2018 on November 30, 2018, and the scope of the ABS project ends at the end of October 2018. It focuses on explaining the risk events, classification basis, and risk management work of asset-backed securities of default type, risk type, and some special-mentioned asset-backed securities with high credit risk and asset-backed securities with significant adverse changes in risk classification after the end of the previous reporting period. If there is untimely reporting, omission, or misstatement, or if it is found that the manager has not fulfilled the corresponding credit risk management obligations by the regulations during the credit risk investigation or promotion of resolution and disposal of asset-backed securities, the Exchange will, by relevant business rules, consider Self-regulatory measures or disciplinary actions should be taken.
On March 22 this year, the Shanghai and Shenzhen Stock Exchanges and the Quotation System released the Guidelines for Credit Risk Management during the Duration of Asset-Backed Securities (for Trial Implementation) (Draft for Comment) and the Guidelines for the Content and Format of Periodic Reports for Asset-Backed Securities (Draft for Comment) ”, which aims to clarify the relevant responsibilities of each market participant and strengthen information disclosure during the duration and credit risk management. Based on actively summarizing regulatory experience and extensively listening to the opinions of market institutions, on May 11, the Shanghai Stock Exchange issued and implemented the Guidelines for the Content and Format of Periodic Reports of Asset-Backed Securities and the Guidelines for Credit Risk Management During the Duration of Asset-Backed Securities ( Trial)”.
Asset-backed lifetime risk management guidelines clarify the specific responsibilities of managers, original owners, asset service agencies, credit enhancement agencies, custodians, credit rating agencies, and other participating institutions in credit risk management, which will help future asset securitization business It will be developed under a more normative framework.
2. ABS product types are further enriched
In terms of innovative products, in November, the market successfully issued the first ticket revenue right ABN for scenic spots in the inter-bank market, the first public talent rental housing Reits in the country, the first affordable public rental housing ABS, and the first New Third Board listed company water supply charging rights. ABS-like, the first ABS product on the life service e-commerce platform was successfully approved.
2.1. The first scenic spot ticket revenue right ABN issued in the inter-bank market was successful
On November 1, 2018, “Yangzhou Slender West Lake Tourism Development Group Co., Ltd.’s 2018 First Phase Asset-Backed Notes” initiated by Yangzhou Slender West Lake Tourism Development Group Co., Ltd. was successfully issued in the inter-bank bond market. This project is the first inter-bank transaction. The asset securitization project of scenic spots is of great significance to further expand the financing of scenic spots. 18 The issuance scale of Slender West Lake ABN001 is 2.2 billion yuan, of which the priority A tranche is 2.090 billion yuan, accounting for 95%, and the coupon rate is 6%. The basic asset of this project is the right of income from tickets for a specific period enjoyed by Slender West Lake Tourism Development Group Co., Ltd. The cash flow of the underlying asset depends on the ticket price of Slender West Lake Park and the flow of tourists. In terms of credit enhancement measures, the current asset-backed notes are arranged with senior/secondary.
2.2. The first phase of the country’s first public talent rental housing Reits was successfully issued
On November 7, 2018, the first domestic public talent rental housing REITs product – “Shenzhen Venture Capital Anju Group Talent Rental Housing Asset Support Special Plan” was successfully issued. The project adopts the shelf issuance model, with a total amount of 20 billion yuan, and the talent rental housing within Shenzhen held by the original owner, Shenzhen Talent Anju Group Co., Ltd., is used as the underlying property asset. Among them, the initial issuance scale is 3.1 billion yuan, with a term of 19 years. Anju Group provides credit support for the special plan. Both the senior and intermediate-level asset-backed securities are rated AAA, and the senior issuance rate is 4.38%. This REITs product is hailed as an important innovative practice in promoting the securitization of housing rental assets and developing asset securities for domestic public rental housing.
2.3. The first affordable public rental housing ABS was successfully issued
On November 14, 2018, the “Changjiang Asset Management-Wuhan Real Estate Public Rental Housing Asset-backed Special Plan” (hereinafter referred to as “Wuhan Real Estate Public Rental Housing ABS”) was successfully established, with a total issuance scale of 891.5 million yuan, a term of 18 years, and an average coupon rate of 5.08 %. Wuhan Real Estate Development and Investment Group Co., Ltd. is the borrower, the pledgor, and the repurchase and repurchase undertaker. Wuhan Affordable Housing Investment and Construction Co., Ltd. is the asset service institution and joint debtor. The original owner is Wuhan Urban Development Investment Co., Ltd. This project is the first asset securitization project in China that uses public rental income as the underlying asset. Wuhan Real Estate Public Rental Housing ABS adopts priority/secondary securities stratification. Wuhan Real Estate Group pledges its claim rights and other rights to all the lessee’s accounts receivable according to the “Leasing Contract”, and promises to sell it. The senior asset-backed securities are sold or repurchased on the repurchase date/repurchase date.
2.4. The first ABS listed on the NEEQ was successfully issued
“Huan Jiang Water Supply Water Supply Charging Right Asset-backed Special Plan” was successfully issued on the Shanghai Stock Exchange on November 14, 2018, with a product scale of 704 million yuan. This product is the first ABS in the country with the right to charge water supply for a company listed on the New Third Board. Huan Jiang Water’s water supply charging right ABS product has a priority of 668 million yuan, an AAA rating, and a secondary 36 million yuan, with no rating. The term is 6 years. The original owner is Huanjiang Water Co., Ltd., which plans to manage Rencaitong Asset Management and promote Rencaitong Securities (diagnostic stock). The person/liquidity support institution is Zhuji State-owned Assets Management Co., Ltd.9.87 +0.41%
2.5. The first life service e-commerce platform ABS product was successfully approved
On November 21, 2018, the first phase of the “CICC-Meituan Business Loan Phase X Asset-backed Special Plan” was successfully established on the Shenzhen Stock Exchange. The shelf issuance quota of the project is 5 billion yuan, and the initial issuance scale is 500 million yuan. The plan is the first domestic life service e-commerce platform asset securitization product, and its underlying assets are the “Yaodai” loan claims issued by Chongqing Sankuai Microfinance Co., Ltd. to the cooperative merchants of Meituan. com and Dianping.com.
