Grandway advises on RMB5.4bn SOE CMBS in China


Partners Wang Tian and Liu Qian of Grandway Law Offices assisted the joint ventures under China State Shipbuilding Corporation and Citic Pacific in issuing RMB5.4 billion (USD74 million) worth of commercial mortgage-backed securities (CMBS).

This is the first central state-owned enterprise CMBS to be issued and where neither the issuers nor their shareholders are involved in the credit enhancement instrument, which is relatively rare in China. Financial products of SOEs in China are subject to strict regulations, so the CMBS must have credit enhancement instruments from both the issuer and the third-party guarantor institution.

The CMBS is a type of asset-backed securities product collateralised by commercial real estate. Future income from the underlying commercial real estate – including rents, property fees and business management fees – is the main source of funds servicing the principal and interest of the debt.

The issuance, named CSC Financial-Shang Chuan Asset Support Special Plans (Series 1), debuted on the SSE.

The CMBS is split into four instalments, with RMB3.1 billion issued in the first instalment, comprising RMB2.22 billion in the senior A tranche with an 18-year maturity and 3.08% interest rate, and RMB880 million of the senior B tranche with an 18-year maturity and an interest rate of 3.28%.

The issuers include China State Shipbuilding Real Property, Shanghai Ruiming Real Property and Shanghai Ruibo Real Property, all of which are joint ventures between China State Shipbuilding Corporation and Citic Pacific.

CSC Financial acted as the distribution agency and plan administrator. The guarantor institution is the China National Investment and Guaranty Corporation.