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Firm Served CIB First Credit ABS 2007-12-21

  On December 13, 2007, the CIB XingYuan Credit Assets Backed Securities 2007-1 has been successfully issued in the intra-bank bond market  through book-building.

  Zhong Lun is the only law firm retained for serving this project. Zhong Lun’s team includes Zhang Xue-bing, Liu Bo-rong, Huo Wei, Li Hong, Long Hai-tao, Tian Zhi-gang, Yang Yan-ni, Li Ke, Cai Zhi-jie and Ren Wen-xia. Retained by Industrial Bank Co. Ltd (the Originator and Settlor, “CIB”), China Foreign Economy and Trade Trust & Investment Co., Ltd, as trustee and issuer, (“FOTIC”), and the Guotai Junan Securities, the lead underwriter and book-runner (“Guotai”), Zhong Lun provided comprehensive services from deal structuring, legal due diligence over underlying assets, drafting legal documents, issuance of legal opinions,to legal attestation of ABS issue through book-building, and counseling on other relevant legal matters.

  This ABS has three tranches, Class A, Class B and Subordinate Class. Class A is further divided into two subclasses, Class A1, a pay-through ABS, which is paid according to a fixed schedule with fixed rate, and Class A2, a pass-through ABS, which is paid in floating rates designed to be a buffer against acceleration risks of the underlying assets. In addition, the CIB acting as the originator has also provided external liquidity support through a special beneficiary trust to meet the requirement of the liquidity support reserve account mechanism.

  This ABS project is structured as follows: CIB, as the originator and the settlor, creates a special purpose trust and transfers its credit assets to FOTIC. FOTIC issues the ABS to institution investors and distributes cash flow revenue from the entrusted assets for repayment of principal and payment of interest and other benefit of the ABS. The ABS was underwritten by the syndicated underwriters led by Guotai, which also serves as the book-runner for the issuance. FOTIC (the trustee) has retains CIB to provide assets management service and China Minsheng Banking Gorp., Ltd (as the custodian of trust account) to hold the revenue generated from the underlying assets. Standard Chartered Bank (HK) Ltd. is the deal arrange counsel. Ernst & Young is the accountant, and China United Credit Rating Co., Ltd is the rating agency for the project.

  The total volume of the XingYuan Credit ABS 2007-1 is RMB 5,243.25 million, and issued in three tranches: Class A (RMB 4,300 million), Class B (RMB 570 million) and Subordinate Class (RMB 373.25 million). Class A is divided into Sub-class A1 (RMB 2,500 million) and Sub-class A2 (RMB 1,800 million).  Classes A1, A2 and B are issued through book-building and well received at the open market among investors resulting in over subscription of 128%, 146% and 119% respectively.

  Currently, Zhong Lun has been retained as Chinese legal counsel for several ABS projects, and the firm’s team is working on them smoothly as scheduled for introducing more securitization products to China’s financial markets.