ING Securities last week refuted the long running rumor that its Asian securitization operation had effectively shut down following the heavy losses taken by the bank on the National Century Financial Enterprises scandal in late 2002.

ING, along with Credit Suisse First Boston and monoline insurer Ambac, was one of the worst entities affected by the fallout of the U.S. healthcare finance provider. Its asset-backed commercial paper conduit was forced to write off around $500 million when it was discovered that the outstanding NCFE deals significantly distressed if that's the right word and were backed ineligible and/or nonexistent receivables, it has been alleged.

One might reasonably ask, "What does this have to do with securitization in Asia?"

In practice, ING's once-thriving regional franchise was largely dependent on its ability to place deals in its U.S. ABCP conduits. The bank has not completed a deal in ex-Japan Asia since late 2002, just as the NCFE story was breaking. Consequently, rival bankers concluded that ING was out of the game due to the closure albeit temporary of its conduits.

A well-placed source told ASR the claims are way off the mark, though acknowledging that ING's securitization franchise has been weathered by a difficult period. "ING's conduit business never shut down," the source said. "It operated throughout 2002 and 2003 and continues to operate today. The rumors are quite outrageous, but not unexpected given the competitive environment."

Bankers at other firms accepted ING's response, but felt some restrictions must have been imposed on what can be placed in the conduit. "I do not think the conduits absolutely shut down, but they were probably a lot more picky about the assets that went in," commented one banker. "Therefore, that translates into a big slowdown in asset growth and maybe ING's hurdle profit-and-loss requirement is higher."

Another reliable source said that ING actually bid to arrange the $300 million auto loan deal completed in June by Korea's Hyundai Capital, but lost out to Standard Chartered. StanChart was able to do a conduit deal for Hyundai on an unwrapped basis, achieving double-A ratings for the issuer pricing the 0.55-year tranche at 35 basis points over Libor and the 1.58-year tranche at 51 basis points over Libor.

It would have been hard for ING or any other firm to compete with StanChart on a pricing basis, especially if there were constraints on conduit deals from Asia, such as not being able to include unwrapped transactions. Bankers at ING declined to comment on the nature or existence of restrictions in funding assets from Asia.

What is clear: ING's ex-Japan securitization team has suffered as much as anyone from the fallout of the Korean cross-border market at the end of 2002. Signs of recovery only became evident in April, with the completion of Korea First Bank's $499.6 million MBS via UBS. That was the first public international deal done out of Korea since December 2002.

ING was once at the forefront of the Korean market, arranging two deals for Samsung Capital and one for Samsung Card in 2001, following up in 2002 with a $500 million issue by Kookmin Card and a $210 million consumer loan deal for Samsung Capital in December. That was the last deal ING completed in ex-Japan Asia.

In March 2003, ING lost its head of Asian securitization, John Mullins. Mullins left to head a new regional securitization group at Royal Bank of Scotland in Tokyo. Mullins brought several people with him, including Richard Lamb who, along with Kevin Lam, was largely responsible for developing the franchise outside of Japan.

Lam has remained at ING and now leads a much smaller team, which by all accounts have been busy trying to maintain the performance of its existing Korean deals. The bank did win one mandate shortly after Mullins departed, an MBS for E-Sun Bank in Taiwan, although the status of that deal is unclear.

It is good news if, as the market is now suggesting, ING is actively targeting new deals. However, with its position as king of Asian conduit transactions usurped by Standard Chartered, challenging times still lie ahead.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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