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Industrial Bank's First NPA-backed Securization Project Receives Excessive Oversubscription

On July 26, 2017, the second non-performing asset-backed securization project across the market after the NPA-backed securization expansion experiment - “Xing Rui 2017 Phase I NPA-backed Securization” (hereinafter called “Xing Rui Phase I”) was successfully issued in the interbank bond market with a scale (par value) of RMB 159 million and received oversubscription. This is the first non-performing asset-backed (NPA-backed) securization project issued by Industrial Bank (IB) with China Merchants Security as the main underwriter.

The basic assets of “Xing Rui Phase I” consist of creditor's right to non-performing assets of credit cards, which features high dispersion, short average overdue period, high expected recovery rate and relatively high rate of over-collateralization. The sufficient safety margin provides powerful safeguard for cashing the NPA-backed securities. In addition, the released cash flow volatility has been set in the trading structure and arrangements been made to guarantee the interests of the investors of asset-backed securities, so as to further reduce redemption risks.

This “Xing Rui Phase I” has received positive market response and the priority and inferior rating all received oversubscription. Under the context of volatile and high interest rate of bond market and tight liquidity, the successful releasing of this product is meaningful to the pilot work of NPA-backed securization business. It is expected that the NPA-backed securization will become a new normative way of disposing of NPA by commercial banks.

IB, the issuing bank, has accumulatively issued 16 asset-backed securization projects with the total scale of RMB 73.755 billion before this product, thus gaining considerable experience in the implementation and management of asset-backed securization projects. The main underwriter China Merchants Security (CMS), with two No. 1s in the market in terms of the underwriting scale of ABS, has leading technologies in NPA-backed securization business and has underwritten 15 NPA-backed securization projects from 7 banks, totaling RMB 10.884 billion, and accounting for 64.30% of all NPA-backed securization projects. The collaboration of IB and CMS makes investors more confident.

IB has always led the industry in terms of asset quality. As the first NPA-backed securization project issued by IB, this project marks a new exploration of IB in NPA disposal and shows the intention of IB to dispose of NPA in a market-oriented and investment-based way and generating benefits from NPA.