The Korea Deposit Insurance Corp. (KDIC), the government agency responsible for restructuring the Korean financial sector, last week mandated four banks - two domestic, two foreign - to structure a transaction to be backed by lease receivables originated by the organization.

The partnerships of Credit Suisse First Boston and Daewoo Securities plus Societe Generale and Hyundai Securities were selected to structure and sell the deal, although at this stage it has not been announced who will be doing what. CSFB recently set up a team in Singapore to cover ABS in non-Japan Asia.

Although it will be of little consolation now, the joint offer of Deutsche Bank and Hana Securities came in third behind the two winning bids. Credit Lyonnais, Salomon Smith Barney KEB, ABN Amro and J.P. Morgan were the other foreign houses to miss out.

It is believed that the underlying assets for the transaction will be made up of around $800 million performing leases and $200 million non-performing leases. The senior class of notes to be issued on the deal is expected to total somewhere around $450 million.

The KDIC's decision to bring in so many banks raised eyebrows, and one prominent local banker poured scorn on it. "The deal is definitely doable," he said. "But trying to appease both the western and Korean houses mean that it will be a bit of a dogs dinner."

Even one banker close to the deal admitted as much, answering the question whether it was going to be difficult with four banks with the terse reply, "You said it." It is rumored that the client originally only wanted to use domestic houses, but came round to the idea of foreign partners because of their access to a far wider international investor base.

All four banks have begun the process of due diligence on the underlying portfolio, so it should soon become apparent how the teams are working together and on who will perform what function as the deal is put together.

Talk of the KDIC entering the securitization market has been around for some time now - ASRI first wrote about it in May (ASRI, 5/22/2000 p.1) - but it would appear that its hand has been forced. Because of tax and regulatory issues, the aim is to complete the deal by March 31 next year, and there are some doubts as to whether this is feasible, according to one ABS professional. "It's difficult enough to do any kind of asset backed deal in Korea that quickly," he said. "And to get it done by the end of the financial year will be a task and a half."

If the current deal is achievable, it will be a rise from the ashes of a deal that was initially talked about at the tail end of 1997. Hanarum, once an independent organization but now part of the KDIC, mandated ING Barings and Deutsche Bank to look into the possibility of doing a leased backed transaction, but it failed to materialise.

One rumor suggested that this was a result of the underlying portfolio being of insufficient quality. The current attempt is said to include some of those original assets, but only the better quality leases.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.