Malaysian lender CIMB may launch CLO - source

KUALA LUMPUR, March 21 (Reuters) - Malaysia's second-largest lender, CIMB Bank, may launch a collateralised loan obligation (CLO) backed by existing loans, a source familiar with the deal said on Friday.

Plans for the deal are at a very early stage and several factors, such as credit market conditions, would determine whether the deal would be launched, the source added.

"It's quite preliminary," said the source. "It's not definite that the bank will do it. Markets are so choppy everywhere."

Details on the size of the CLO or the type of loans it would bundle together had not been determined, the source added.

CIMB had no immediate comment.

CIMB Bank is part of CIMB Group which is listed on the stock exchange through Bumiputra-Commerce Holdings (BUCM.KL).

A CLO is debt backed by a pool of new or existing loans. Typically, a bank transfers its loans to a special purpose vehicle.

If the loans sold are existing debt, the funds raised are delivered to the bank. If the loans are new debt, the funds would be given to the borrowers.

CLOs can reduce credit risk for the lender and potentially enable borrowers to raise cheaper funds than they could get if they borrowed individually.

OSK Investment Bank, the investment banking arm of OSK Holdings Bhd (OSKH.KL), said in October it was arranging a CLO worth up to 2 billion ringgit ($629 million) to raise funds for small firms.

There has also been talk that RHB Investment Bank, the investment banking arm of RHB Capital (RHBC.KL), would launch a CLO worth about 1 billion ringgit.

Malaysia's first CLO was issued in 2002 by a special purpose vehicle on behalf of Affin Bank, a unit of Affin Holdings (AFIN.KL), one of the country's smallest banking groups.

($1=3.180 Malaysian Ringgit)

(Reporting by Liau Y-Sing, editing by Jacqueline Wong)