Malaysia Inching Closer to ABS


In the hope of encouraging more securitization deals, Bank Negara, Malaysia's central bank, has announced it will soon issue securitization guidelines that will clarify the regulatory and supervisory treatment of asset-backed deals.

The guidelines will likely be a revision of draft guidelines previously issued by the bank last October, which invited comments from market participants.

"These guidelines are meant to kick-start securitization in Malaysia, but they will be very general," said Kirby Lee, manager of the new product group at Rating Agency Malaysia Bhd. "A lot will still depend on individual submissions to the central bank, which in the future will come out with administrative measures regarding types of assets that can be securitized, what sort of debt securities can be issued by an SPC and so on," he added.

The announcement is a U-turn by Bank Negara, which until recently was decidedly unsupportive of securitization deals. Indeed, it had earned the wrath of many securitization bankers in Asia by standing in the way of several proposed transactions in 1997 and 1998.

Its attitude changed after the decision to impose exchange controls last September made it much more difficult for Malaysian companies to access foreign capital.

Potential ABS issuers reportedly include domestic merchant banks, government-backed firms such as Petronas and Malaysian Airlines, and in the long run, the country's bad bank agency, Danaharta (see related story on Petronas, p. 8).

Securitization pros in Asia have recently been flocking to Kuala Lumpur to sniff out potential opportunities. "There has been a lot of activity by both local potential issuers and foreign advisers. There's a new wave of excitement regarding ABS in Malaysia," Kirby remarked.

Additionally, the central bank said it would also allow corporates to issue double-B rated bonds - as opposed to the current minimum rating of triple-B - in cases of debt restructuring schemes involving the conversion of existing loans to bonds.

Bankers expect that the relaxation would make it easier for corporates to issue bonds backed by loan repayments. "It's not clear yet, but it may make it easier to issue senior/sub loan deals," said a London-based source.