Dacheng Advises China Northern Asset Management Co., Ltd. on Formation of First Off-Balance Sheet ABS Scheme

On February 27, 2015, China Southern Assets Management Co., Ltd. successfully launched Southern Qiyuan-Far East Horizon (“Nanfang Qiyuan-Yuandong Hongxin”) (Tianjin) No.1 Asset-backed Securities Scheme (“ABS scheme”). On February 16, the scheme was given approval for trading on the Stock Exchange of Shenzhen. A total of RMB629mln worth of securities would be issued under the scheme. 

As the first off-balance sheet ABS in China compared to previous ones with leases as underlying assets, it brings insights to securitization in the financial lease sector. The ABS scheme is also the first such scheme launched by a subsidiary of a fund company following the release of CSRC’s new regulation on asset securitization. It is also one of the first securitization products issued on the Stock Exchange of Shenzhen since the requirement on filing began to be implemented. Structurally, apart from traditional internal credit enhancement measures, the scheme has introduced extra liquidity supported by affiliated parties of the original obligee, with the scheme paying certain amounts of service fees to the affiliated parties.

China Southern Asset Management Co., Ltd., subsidiary of China Southern Fund acted as manager of the scheme, with China Merchant Bank (Xi’an branch) as trustee, Far East Horizon (Tianjin) Limited as the original obligee and asset service agency, China Merchant Bank as the distributing agency, Guotai Junan Securities as financial advisor and Far East Leasing Co., Ltd. as the liquidity supporter. 

Dacheng capital markets attorneys from Shanghai and Xi’an collectively advised on the scheme. The team was led by Shanghai-based senior partner Wang Hanqi and partner Fan Jianhong and Xi’an-based partner Chen Jie and associate Zhang Yindi,with support from Shanghai-based paralegal Guo Mengyuan, Xi’an-based paralegals Shen Weiling, Li Lei and Shen Dongdong. The attorneys structured the deal, conducted due diligence, offered legal counsel, drafted and reviewed transactional documents and issued attorney’s opinion letter.