Project Dynasty – Major commercial mortgage-backed securities transaction

The transaction, led by Head of Chambers Moorari Gujadhur, assisted by Vithil Dabee, which closed in February 2014, involved the provision of a RMB 1,300,000,000 facility by Standard Chartered Bank (Hong Kong) Limited to Dynasty Property Investment Holdings Limited, a company incorporated in Bermuda and a wholly-owned subsidiary of Macquarie Wanda Real Estate Fund Limited.

This transaction is the second overseas commercial mortgage-backed securities transaction after China’s first cross-border offering of commercial mortgage-backed securities in 2006, on which, again, Moorari Gujadhur, as lead partner, advised the Finance Parties. The notes were backed against a single mortgage loan from sole arranger Standard Chartered. The mortgage, in turn, is backed against rental income from nine Wanda shopping malls in China.

The structure has created a buzz among bankers as it effectively sidesteps one of the biggest hurdles to offshore financings out of China – the lack of recourse to onshore assets.

“This landmark transaction includes several structural mechanisms, which address the concerns of offshore investors in investing in onshore assets,” said Jerome Chang, a vice president at Moody’s. “It is an important step in developing the market and setting a precedent. It also highlights the potential of using onshore assets to back offshore borrowing,” Chang said. “It is a good base model, if there is a further relaxation of regulations in the future.”

After a US$40 billion spree of overseas bond issues in the past two years alone, the structure may provide Chinese property companies with an alternative means of offshore fundraising.

This innovative transaction has been highly commented upon in the financial press and market analysts expect other Chinese commercial property companies to use this structure to raise cheap funding abroad.

Madun Gujadhur QC

Madun Gujadhur QC was called to the English, Indian and Mauritian Bar and was made Queen's Counsel in 1976. During his successful career, Madun Gujadhur QC acted as counsel on a number of leading and landmark cases.



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