Bond back by hire purchase

KUALA LUMPUR: CIMB Bank, plans to sell up to RM10 billion in asset-backed bonds over 20 years, the company said on Tuesday.

The paper, backed by car loans, would have maturities of one, three, five, seven and eight years with the first tranche of RM505 million to be issued next month, said Patrick Khoo, CIMB Bank's head of securitisation and structured finance.

The US subprime mortgage crisis has jolted global credit markets, scuppering some planned bond sales.

But the bank was confident demand for the paper would be strong despite the current market turmoil.

"The ringgit market is relatively insulated," said Lee Kok Kwan, group treasurer of CIMB Group.

"The good thing about Malaysia, relative to its peers in the region, is that the local currency debt market here is very developed. Therefore the exposure to USD assets, USD credit is very limited."

Malaysian Rating Corp (MARC) had said in a statement late on Monday that the bonds would be issued in three classes, to be rated AAA, AA and A+.

One tranche of the bonds would be backed by interest and principal payments from hire-purchase loans that had been given to buyers of new Proton cars, MARC said.

These loans were originally made by CIMB, a unit of financial group Bumiputra-Commerce Holdings Bhd, on behalf of Proton Commerce Sdn Bhd, a joint venture between CIMB and Proton Edar, a distributor for car-maker Proton Holdings Bhd. - Reuters



This look good because Proton cars interest rates are high. Instead of financing the car loan with own capital, CIMB use the bond holder money to finance car purchasers and in return, they make money from there.