Alibaba's Asset Securitization Product Approved
(Beijing) – A new asset-backed securitization plan jointly developed by Alibaba's financial arm and brokerage firm Orient Securities Asset Management Co. has won approval from the securities regulator and is expected to be offered to investors soon.
A source close to the matter said on July 4 that the plan, which is operated by Orient Securities, will allow people to invest in loans that Alibaba has provided to small businesses on the Internet giant's online platform.
Investors can expect a 6 percent annual return on their investment, with money generated by repayment of the loans.
The approved plan includes 10 asset-backed securitization products from Alibaba. Total issuance is expected to reach 5 billion yuan, media reports say.
The plan, which has been under review by the China Securities Regulatory Commission (CSRC) since February and undergone rounds of revisions, is China's first loan-backed securitization product.
Analysts said the products will help increase the liquidity of Alibaba's small-loan business.
Alibaba started its own small-loan business, called Aliloans, in 2009. It set up two subsidiaries, one in Chongqing and the other in Zhejiang Province, to run the business. Loans are provided to small and family businesses that operate on its e-commerce platforms.
The subsidiaries have a combined registered capital of 1.6 billion yuan. Under the regulation of China Banking Regulatory Commission, they can borrow up to 800 million yuan from banks to finance operations.
Company information shows that by the end of June 2012, Alibaba had offered 26 billion yuan in loans to 129,000 small businesses.
To supplement capital, the two companies have sought extra funding via trust companies. In 2012, they launched two trust products. The Chongqing version raised 240 million yuan and the one in Zhejiang raised 120 million yuan.
Data from the central banks show that by June 2013, a total of 89.6 billion yuan worth asset-backed securitization products have been issued in the inter-bank market.
However, the development in stock markets has remained slow. Only a few products have been rolled out by brokers including CITIC Securities and China International Capital Corp. All of the products are based on revenue generated by real assets
In February, the CSRC revised rules on broker's asset-backed securitization product management by allowing issuance of products based on loan, trust and equity interests.
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