First infrastructure loan-backed securitisation (ILBS) completed by Deutsche Bank TAS team in Hong Kong SAR

An infrastructure loan-backed securitisation (ILBS) transaction with a diversified portfolio of infrastructure loans in the APAC region and into the Middle East and South America highlights Deutsche Bank’s Trust and Agency Services’ (TAS) product expertise in asset-backed securities (ABS) transactions and in the region.

TAS APAC acts as trustee and various agent/administrator roles with long-term client and asset sponsor The Hong Kong Mortgage Company (HKMC) in their Bauhinia ILBS 1 Limited’s ILBS transaction. HKMC is an established institution in Hong Kong SAR promoting stability of the banking sector and is a quasi-governmental agency. They sponsored 35 loans going into 25 infrastructure projects including roads, water and social sub-sectors in 12 countries across the Asia-Pacific, Middle East and South America. This ILBS provides sustainable fixed income returns to the ILBS investors from performing loans into the long term with five different classes of rated ILBS notes.

An ILBS is a type of securitisation within the classification of ABS or collaterialised loan obligation (CLO). An ILBS is a note/bond investment instrument which is backed by a portfolio of project and infrastructure loans. Hence, the return of ILBS mirrors the return and loan performance of the backed project and infrastructure loans. This Bauhinia ILBS covers multiple geographies and sectors – and obligors – through different project and infrastructure loans. It aims to contribute to portfolio diversity and therefore diversification of risk. This Bauhinia ILBS offers various tranches of notes in different tenors to investors which are externally rated by an internationally recognised rating agency.

HKMC have invested in a wide range of global infrastructure projects, this is the first ILBS transaction sponsored by HKMC and is the first ILBS issued out of Hong Kong SAR. It is a complex transaction in the structured finance space and has drawn upon on the expertise of many different specialists. This demonstrates TAS’ market-leading position with our global and regional expertise – a great example of the Global Hausbank approach, where a local servicing platform is connected to a global network of expertise, working efficiently and seamlessly for the client.

Successfully closing this ILBS is also an important milestone for the Hong Kong SAR government, this first mover status gives TAS and Deutsche Bank track record with future ILBSs/ABSs of HKMC or other asset managers. With TAS already administering ABSs in the Singapore market, TAS are now widening their geographical reach in the APAC region.

Working on Hong Kong SAR government and quasi-government related transactions over two decades as well as unparalleled ABS service expertise were instrumental to the success of being awarded this ILBS mandate on the trustee and agency roles. The Deutsche Bank team in Hong Kong SAR have supported HKMC with their mortgage-backed securitisation issuance and the Hong Kong SAR government with their Islamic finance transactions in the past as a trusted partner.

Daniel Clark, head of TAS APAC commented. “I am delighted that this deal has been closed successfully, it is acknowledgement of our product expertise in the region and represents a huge first step for our ABS offering in Hong Kong SAR. My thanks to everyone on the team.”

Ivy Fung, the deal leader, added: “It was a great pleasure to work on this deal. We faced challenges with it being the first ILBS in Hong Kong SAR during the execution stage especially in those months of huge market volatility, but the team pulled together, in Hong Kong SAR and in India, in a timely and professional manner.”

She continued, “I know that HKMC appreciate our professionalism. This is now a long-term relationship, and this professionalism works both ways.”