Korea's Standard Chartered First Bank (SCFB), ex-Japan Asia's leading mortgage-backed issuer, has completed the region's largest ever cash securitization. SCFB's parent Standard Chartered Bank was sole lead manager on the $1.26 billion-equivalent RMBS, sold via the Korea First Mortgage SPV.
The deal - the seller's sixth cross-border securitization - was backed by 12,156 loans with a weighted LTV of 54.7% and seasoning of 16.1 months.
With North Korea's increasing its nuclear testing program just as the deal was being launched, further heightening tensions in the Korean Peninsular, rival bankers wondered whether SCFB had picked the right time to issue its first publicly-offered unwrapped deal.
Those concerns proved unfounded, however, with SCFB able to set new pricing benchmarks across both the US dollar and Euro tranches. All the notes priced in the middle of the indicative range.
The A1 tranche, rated triple-A by Fitch Ratings and Moody's Investors Service with a 1.6-year average life, featured a $265 million U.S. piece paying 16 basis points over three-month Libor and 125 million ($159.9 million) tranche offering the same spread over Euribor. The 3.2-year A2 tranche - also rated triple-A - comprised $350 million and 285 million tranches offering a pick up of 20 basis points.
In addition, the AA'/'Aa2'-rated $63 million B-class paper offered 28.5 basis points over Libor for 5.6-years. For the same average life, the $33 million single-A piece and BBB'/'Baa2'-rated subordinated tranche respectively paid 45 and 80 basis point spreads. According to the lead manager, 30 investors bought into the deal with European accounts taking 53% and Asian buyers 47%. Banks and asset managers took up 94% of the bonds.
"We are particularly proud of the huge success of this landmark transaction, which certainly set a number of important benchmarks for the Asian securitization market," said Warren Lee, head of Asia asset securitization at Standard Chartered Bank. "Achieving such success for a deal of this magnitude and complexity, especially during a challenging market environment, is a testament of investors' confidence in the quality of SCFB's management team and mortgage business."
Even bankers from rival houses agreed with Lee's assessment. "That's an excellent result for SCFB and the Korean market," one banker said. "It might encourage other banks to securitize mortgages now they know tight spreads can be achieved without a wrap."
"It is surprising investors have not asked for more in view of North Korean situation," another market veteran added. "That aside, this is still better value than the recent cross-border consumer finance deals out of Korea, and the borrower has benefited from the scarcity of quality Asian ABS deals in 2006."
Another regular Korean cross-border issuer, Samsung Card, last week launched its latest credit card ABS. Standard Chartered Bank is sole lead manager and swap provider on the $300 million deal, sold via the Frontier SPV.
Moody's has provisionally assigned triple-A ratings to the deal, which reaches legal final maturity in August 2010.
The transaction uses a typical structure for Korean cross border deals. An offshore SPV uses proceeds of selling notes to investors to purchase a floating rate bond from a Korean domiciled special purpose company (SPC).
In turn, the SPC uses those proceeds to subscribe for investor interest from a trust, which will also issue subordinated seller interest and seller interest. Both will be bought by Samsung Card, who will transfer ownership of the credit card pool to the trust.
The deal features a revolving period until January 2009 whereby new assets can be transferred to the trust, followed by controlled amortization until maturity.
Samsung last tapped the market in March with a $300 million privately placed ABS arranged by Royal Bank of Scotland. The triple-A notes offered a 17 basis point spread over Libor.
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