The non-performing loan securitization for the Korea Deposit Insurance Corp, which is expected in the market by March or April, may make use of a monoline insurance wrap. The bankers structuring the deal, which could be worth up to $500 million, are talking with monoline firms about a wrap that would take the deal's ratings up to triple-A.

The transaction is being lead managed by Credit Suisse First Boston, Daewoo Securities, Hyundai Securities and SG Asia.

Bankers said that a wrap will only be used if the pricing makes it more economic than issuing without external enhancement, but added that for the first time since the Asian financial crisis the monolines seem to be ready to return to the non-Japan Asia securitization market.

If the deal goes ahead with a wrap, it will be the first time that the monolines have wrapped a non-Japan Asian securitization since the crisis and it could herald a more general return of the monolines to the region, bankers said.

Yet the return of the monolines could be blown off-course by a default by Asia Pulp & Paper, Asia's largest high-yield borrower with debts outstanding of over $9 billion. While none of the monolines are exposed to the company, a default may dislocate the Asian bond markets and force the monolines to be as risk averse as they have been for the last four years.

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