China, People's Republic of: Asset-Backed Securitization for Expressway Financing and Corporate Debt Restructuring in Yunnan Province

Sovereign Project | 41181-012

Summary

The impact of this small-scale technical assistance project is a broadened long-term financing sources through wider selection of fixed-income investment tools for expressway companies to tap into the capital markets by December 2008. The outcome is a detailed executable plan on carrying out the debt structure to formulate and execute the asset-backed securitization (ABS) transaction in the Yunnan province by June 2008.

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Project Name Asset-Backed Securitization for Expressway Financing and Corporate Debt Restructuring in Yunnan Province
Project Number 41181-012
Country China, People's Republic of
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 7052-PRC: Asset-Backed Securitization for Expressway Financing and Corporate Debt Restructuring in Yunnan Province
Technical Assistance Special Fund US$ 150,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change
Sector / Subsector Finance - Infrastructure finance and investment funds
Gender Equity and Mainstreaming No gender elements
Description The impact of this small-scale technical assistance project is a broadened long-term financing sources through wider selection of fixed-income investment tools for expressway companies to tap into the capital markets by December 2008. The outcome is a detailed executable plan on carrying out the debt structure to formulate and execute the asset-backed securitization (ABS) transaction in the Yunnan province by June 2008.
Project Rationale and Linkage to Country/Regional Strategy Part of ADB's financial sector strategy, as stipulated in the most recent Country Partnership Strategy, is to introduce innovative financial modalities and assisting provincial and local level authorities to access capital markets by broadening the range of financial products available, including securitization and use of guarantees.
Impact Broadened long-term financing sources through wider selection of fixed-income investment tools for expressway companies to tap into the capital markets by December 2008.
Project Outcome
Description of Outcome Detailed executable plan on carrying out the debt structure in order to formulate and execute the ABS transaction in Yunnan by June 2008.
Progress Toward Outcome To be determined after the consultants have been fielded.
Implementation Progress
Description of Project Outputs

Identification and evaluation of the availability of net toll revenues and stability of cash flows from existing expressways recommended by YHIC

Review of existing debt structure and asset collateralization, identification of the need for debt restructuring and recommend plans to carry out needed measures

Recommendation of options for the ABS transactional structure for efficient fund raising and streamlining the debt structure for the concerned expressways

Identify policy, legal and regulatory impediments and transaction risks for this ABS issuance, and recommend proper mitigation measures with a view to improving and refining the understanding of reforms that are still required

Assistance in selection of the investment bank and other intermediaries for the transaction

Preparation of a report providing detailed executable plans on carrying out the debt restructuring and formulating the ABS

Status of Implementation Progress (Outputs, Activities, and Issues)

No TA Agreement Letter was sent in view of the small amount of this TA and in the absence of any unusual obligations on the part of the PRC Government.

The individual International ABS Specialist/Team Leader was engaged on 27 Feb. 08. Recruitment for a National Debt Restructuring Specialist was cancelled as the potential candidate's counteroffer was deemed unacceptable by EARG.

Delays are being experienced due to slow progress in regulatory reforms for the ABS market as well as changes in the expressway investment pipeline of ADB in Yunnan where the pilot project will be conducted.

The ongoing global financial crisis has halted the process of establishing a regulatory framework for securitization in the PRC. However there are still sporadic attempts to revive the securitization. EAFM will discuss with the EA and plan next steps for TA implementation.

A major change in scope and implementation arrangements was approved by VP02 on 9 December 2009. The change is to support a local bond issuance of the municipality of Kunming in the province of Yunnan. The TA will now facilitate the issuance of local bond instead of the issuance of asset backed securites (ABS) of expressway companies.

ADB sponsored the Development Research Center of the State Council of the PRC to hold a workshop on "Local Government Finance and Risk Management International Experiences & Lessons" in Beijing, PRC on the first week of December.

The workshop was attended by senior members of various government stakeholders such as Ministry of Finance, National Development and Reform Committee, People's Bank of China. Non-government stakeholders such as representatives from China Development Bank, Cinda Asset Management Company and Huaxia Bank also participated in the workshop sessions.

Geographical Location East Asia
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services The TA will engage one international and two national consultants for a total of 6 person-months including the team leader and international ABS specialist (1.5 person-months), national ABS specialist (3 person-months), and national debt restructuring specialist (1.5 person-months). The consultants will be selected and engaged on an individual basis in accordance with ADB's Guidelines on the Use of Consultants.
Responsible ADB Officer Seung Min Lee
Responsible ADB Department East Asia Department
Responsible ADB Division Public Mgt, Financial Sector and Regional Coop Division, EARD
Executing Agencies
Yunnan Provincial Department of Transport Lu Yun Feng1 Western City Ring Road, Kunming 650031, PRC
Timetable
Concept Clearance 18 Dec 2007
Fact Finding 11 Mar 2007 to 25 Mar 2007
MRM -
Approval 11 Jan 2008
Last Review Mission -
PDS Creation Date 14 Feb 2008
Last PDS Update 19 Sep 2013

TA 7052-PRC

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
11 Jan 2008 - 11 Jan 2008 30 Jun 2008 31 Dec 2010 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
150,000.00 0.00 50,000.00 0.00 0.00 0.00 200,000.00 11 Jan 2008 106,360.16

Safeguard Documents

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Evaluation Documents

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