Korean credit card issuer LG Card completed its second private ABS, a $400 million deal via Merrill Lynch. Although Merrill Lynch would not give details on the transaction, observers believe the bank was also the sole investor on the deal, as was the case when the pair worked together last August (see ASR 8/16/04).
While Merrill refused to comment about the deal, officials at LG Card told local media that it will pay 35 basis points over Libor for the 3.25-year offering.
LG Card was one of the issuers most negatively affected by the 2002 and 2003 consumer credit crunch in Korea and even had to be rescued last year by a W5 trillion ($5 billion) bailout package led by Korea Development Bank.
However, the company's performance has improved sharply in recent months. LG Card recently reported a net profit of W479.8 billion for the second quarter, its third straight profitable quarter, while its delinquency ratio dropped from 11.1% to 9.69% over the same period.
Its revival has attracted attention from several domestic and foreign players looking at potentially acquiring the firm, with HSBC Holdings plc and Citigroup Inc. among those linked with a bid. And while bankers scratched their heads last year as to why Merrill would invest in such a troubled company, most now view its investment in LG Card ABS paper as a smart play.
Another Korean card originator, Samsung Card, will shortly test the cross-border market with a transaction led by JPMorgan Securities.
In Taiwan, Yuanta Core Pacific Securities will self-lead a NT$10 billion ($313.5 million) CBO through a special purpose trust. The deal is backed by a static pool of 35 local currency bonds, including inverse floaters and fixed-rate paper, issued primarily by banks and finance companies.
The deal will feature NT$7.3 billion of senior notes, assigned local Aaa' ratings by Moody's Investor's Service, with an expected average life of 3.9-years and 7.5-year legal final. In addition, there will be NT$1.3 billion of five-year Aa2' rated certificates, a NT$1 billion A2' rated tranche with a 5.5-year expected maturity and NT$400 million of unrated paper. Credit support comes through 27% subordination for the senior piece.
Meanwhile, Cathay Life Insurance Corp., a subsidiary of Taiwan's biggest financial services group, Cathay Financial, will launch its inaugural CMBS next month. The company received regulatory approval in April to establish a REIT and the upcoming securitization will finance the purchase of properties (see ASR 5/2/05).
Grand Cathay Securities will arrange the deal, likely sized between NT$11.2 billion and NT$12.9 billion. With Cathay's assets including NT$100 billion of real estate, NT$450 billion of home loans and NT$60 billion in credit card receivables, its scope for securitization is promising.
While Thailand's ABS market has shown encouraging signs in the past year, it lacks a programmatic, benchmark issuer. That could change, however, starting next year. The country's biggest residential property developer, Land & Houses, believes its retail-banking subsidiary will be fully operational in early 2006.
Land and Houses Retail Bank will form when the merger between Land and Houses Credit Foncier and Book Club Finance is completed. The bank expects to be a player in the mortgage business, firstly by offering competitive mortgage rates to buyers of homes developed by L&H, but also by shortening the mortgage approval process to just three days.
L&H says its new subsidiary will fund loan origination solely through issuing mortgage-backed securities. With sales of its own properties expected to top THB36 billion ($880.4 million) in 2005, L&H MBS deals will give a welcome push to the Thai market.
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