Korea has unleashed its first securitization without the support of a monoline guarantee. While the absence of a wrap may signal a drop in business for monolines in that region, it certainly provides fresh diversification opportunities for investors hungry for Korean paper.

"There is movement toward more sophistication as well as growth in investor appetite," said Richard Lamb at ING Bank. "This deal comes on the heels of Korea's sovereign upgrade that allows a double-A transaction to be done without a monoline wrap," Lamb continued. ING managed the deal.

The $500 million Kookmin Credit Card Co. Ltd credit-card receivables securitization marks the first rated cross-border securitization for Kookmin Card, and will achieve a double-A rating - the highest rating to date for a Korean cross-border securitization without a third party guaranty.

The transaction is straightforward: The notes are secured by $500 million of senior bonds issued by Kookmin Card 10th Asset Securitization Specialty Co., and the bonds are in turn secured by investor interest with a principal amount in a Korean trust estimated at KRW615 billion. The trust will issue the investor interest to the bond issuer and a seller interest to the seller. A portion of the latter interest will be subordinated to the investor interest to provide credit enhancement.

"Effectively what this means is that all insurance premiums that were paid for that triple-A structure can now be more efficiently allocated, but it also means that monolines won't see the volumes they are used to," said Lamb.

Market players are hoping that the introduction of unwrapped paper will potentially open the market to investors who may be facing portfolios oversaturated with monoline risk. Presumably, a larger investor base can be tapped, one analyst said.

"It's the typical institutional investor that is looking at these double-A deals," explained Lamb at ING. "Of course, there are some investors that might be restricted to investing only on a triple-A basis, but many investors are looking for yield and they will have to look lower down the credit curve to get it."

Sources familiar with the transaction said that pricing for Kookmin's deal should fall in line with its first market deal, which came with a wrap, and added that the deal should price well within margins where cross-border Korean credit receivables have priced to date.

"There is a large number of transactions being mandated, and we will see a fair increase versus volumes recorded in 2001, driven by the consumer finance sector growth," said one analyst.

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