Emirates NBD Auto Finance Limited is the Middle East’s first true-sale securitization of auto loans and the first securitization transaction from Emirates NBD Bank P.J.S.C., the largest bank in the region by assets. The transaction is secured by a revolving portfolio of auto loans granted to private and commercial clients in the UAE.

The transaction, which raised JPY 19 billion, was guaranteed as to principal by the Japan Bank for International Cooperation (JBIC) and established a number of firsts in the market:

First true sale auto loan securitization in the Middle East providing Emirates NBD match funding for an important part of its retail portfolio

First securitization in the Middle East incorporating a “revolving” structure allowing Emirates NBD to keep the financing in place over a longer term

First ever securitization globally guaranteed by JBIC marking both a real innovation in structured finance and a significant commitment to promoting the stability of auto financing in the UAE

The transaction covered a pool of approximately AED 1 billion of auto loans and involved two special purpose vehicles (SPVs): APC, to which the auto loans are transferred by Emirates NBD under a “true sale” on a revolving basis and (ii) Repack, which purchased a portion of the APC notes as collateral and benefits from the JBIC principal guarantee.

This dual SPV structure allowed JBIC to participate as both a guarantor of the Repack notes and partial investor in the unguaranteed APC notes. As the auto loan pool carries a fixed rate and is denominated in AED, and both APC and Repack notes are floating rate and denominated in yen, a complex currency and interest rate swap was entered into between Emirates NBD and APC.

Emirates NBD also continues to maintain its normal customer relationships and contact with the borrowers as the servicer of the transferred auto loan pool.

The yen-denominated Repack notes were marketed primarily in Japan and Asia and were ultimately substantially oversubscribed. The Repack notes priced at the tighter end of the indicated range at one month Yen Libor plus 100 bps and were placed with Asian institutional investors. The JBIC principal guarantee provided Emirates NBD with a broader access to the Asian institutional money.

Citi and Emirates NBD were joint lead managers on the transaction. Citi also acted as bookrunner.

“The transaction provides Emirates NBD with very important term match funding at competitive pricing levels at a very critical juncture in the financial markets” commented Rick Pudner, CEO of Emirates NBD. “The success of this financing also underscores our leading position in auto loan finance as well as the importance we have placed on tight credit controls and state-of-the art data management and analytical systems.”

“The high quality of the pool in terms of diversity and loss history allowed for a very efficient transaction from Emirates NBD with regards to both credit enhancement levels and pricing terms despite the difficult economic environment”, said Sami Tabbarah, Managing Director at Citi and project manager of the transaction. “The transaction has been very well received in the market.”

Having executed the last two securitizations in the region, including the AED 4 billion real estate backed sukuk for Sorouh in 2008, Citi believes securitization is an important financing tool which is beginning to gain traction in the Middle east region and is pleased that Emirates NBD as the largest bank in the region by assets has taken the lead.

“Securitization financing allows banks and other issuers to more closely match fund certain assets, thereby removing much of the asset and liability mismatches currently on their balance sheets,” said Atiq Ur-Rehman, CEO Middle East Division for Citi. “As the markets in the US and Europe also pick up, Citi is seeing a resurgence in interest for Shariah compliant and conventional securitization and secured finance across the region and across asset classes.”

In addition to the quantitative analysis, Moody’s rating agency conducted operational reviews of the operational, collections, arrears and repossession processes of ENBD as well as reviewing the legal and structural integrity of the issue and the credit quality of the associated parties involved in the transaction.

Each of the APC and Repack notes received Aa2 ratings from Moody’s, the highest rating currently available to issuers out of the UAE.