Citic Securities plans China's first real estate securitisation

SHANGHAI Thu Sep 26, 2013 11:57pm EDT

SHANGHAI (Reuters) - Citic Securities said it plans to sell some primary properties to raise at least 5 billion yuan ($817 million) to consolidate its capital base in China's first real estate securitisation.

In a statement published on Friday in the official Shanghai Securities News, China's largest brokerage (600030.SS) (6030.HK) said there will be a three-step securitisation process.

The company will first transfer rights for two buildings in Beijing and Shenzhen and rights to related land parcels from two units in Tianjin. Then it will sell all stakes in its Tianjin units to its fund unit, Citic Jinshi Fund Management Co, for at least 5 billion yuan, according to the statement.

The brokerage will then rent offices in the buildings to operate, it said, adding that the plan will be submitted to shareholders for approval.

Citic Securities said that if the securitisation succeeds, it stands to get stable income from the fund unit, which will launch a private equity fund for "special innovative financial businesses". The brokerage gave no details.

China's State Council, or cabinet, said in late August that the country would expand a pilot programme to let companies securitise assets. The central bank also announced details on the reform to let firms, in particular financial institutions including banks, sell asset-backed securities (ABS).

Agricultural Development Bank of China, one of China's three policy banks which lend in line with government decrees, completed its first-ever sale of ABS on Wednesday.

Only about 32 billion yuan in securitised products were outstanding in China at the end of June, according to Reuters calculations based on data from three Chinese securities clearing houses.

That compares with more than 56 trillion yuan in commercial bank loans, 27 trillion yuan in bonds, and 4.2 trillion yuan in trust loans that are often packaged into wealth management products.

Official moves to scale up securitisation come as the government has shifted its focus to optimise existing assets as part of efforts to improve the structure of the world's second-largest economy and cut reliance on state investment.

China's broad M2 money supply exceeded 100 trillion yuan for the first time in March and reached 106 trillion yuan by the end of August, causing widespread worries over excessive supply that could fan inflation, asset bubbles and over-investment.

(Reporting by Lu Jianxin and Pete Sweeney)