Korean consumer finance company Daewoo Financial Services Corp. will launch its first securitization by mid-June, a W229 billion ($193 million) auto loan receivables-backed transaction, according to a banker at arranger Daewoo Securities.
Unlike previous domestic asset-backed deals, Daewoo's transaction relied on outside help. Chase helped structure the transaction, will serve as its trustee and will monitor the performance of originator and back-up servicer Hana Bank.
In addition, the securities will be publicly offered and not placed within the same chaebol, or conglomerate - a common practice in Korea's developing ABS market.
The issue from Auto 1999-1 comprises three tranches: one-year notes totaling W120 billion, two-year notes totaling W90 billion, and three-year notes totaling W19 billion. Yields had yet to be decided by press time, but the benchmark will be the three-year domestic corporate bond.
Credit enhancement is a W45 billion subordinate piece that will be kept by the originator, providing roughly 16% overcollateralization. The entire issue is rated double-A minus by domestic agencies KMCC and National Information & Credit Evaluation Inc.
The notes are structured as bullets rather than amortizing securities to fit investor demand. "Unlike ABS structures used in the West, the Korean market is not yet prepared to calculate and price amortizing structures. But we expect amortizing deals later this year," the Daewoo banker explained. Foreign investor participation is also likely due to Chase's involvement, he added.
Meanwhile, Daewoo is already busy with another ABS mandate recently awarded by the Korea Land Corporation (KOLAND), a state-controlled real estate development company. That deal will be backed by receivables paid to KOLAND. Citicorp and Nomura have been retained as structuring agents, but the size and structure had yet to be decided, he said. - VC
