South Korea's domestic asset-backed market continues to grow steadily, as shown by several new deals in the origination pipeline.

Leading the pack is the Korea Land Corporation (Koland), a government land bank, which plans on issuing two separate securitizations in the coming months. The first transaction will be backed by proceeds from real estate sales and development projects undertaken by Korea Real Estate Trust Company, a wholly owned subsidiary of Koland. The W300 billion ($254 million) transaction is being arranged by domestic firm Sejong Securities and is set for launch in August. It is the first transaction in Korea to attempt securitization of real estate trust assets, said a source familiar with the transaction.

Koland is also working on another receivables-backed transaction, recently mandated to Daewoo Securities with Citicorp and Nomura as structuring advisors (ASRI 6/14/99, p.8). That deal will be backed by proceeds from the sale of real estate. The size of the transaction has yet to be determined, according to a Daewoo official.

Set up in 1975, Koland is a major owner and developer of residential and industrial properties throughout Korea. After Korea was hit by recession last year, it has focused more on buying real estate from financially troubled firms and selling to foreign investors. Last summer, Koland bought W3 trillion of real estate from businesses to help corporate restructuring.

Meanwhile, Samsung Securities has just started work on a second auto loan-backed transaction for Samsung Capital Services, the consumer financing arm of the Samsung group. The W300 billion deal is set for a September launch, said a Samsung banker. Earlier this year, the seller raised W63 billion in the country's first auto loan-backed issue (ASRI 4/5/99, p.9).

Finally, efforts to launch the country's first residential MBS are still on track. That transaction, backed by home loans originated by non-bank financial service companies Daewoo Capital, Kumho Capital and Daehan Housing Installment Finance, was mandated to Daewoo Securities in April.

Until recently, legal complications have held up the transaction, after domestic lawyers concluded that the country's new ABS law requires the consent of each obligor before the transfer of "keun" mortgages the most common form of housing finance in Korea could take place. And though an amendment to the law will be passed later this year, the arrangers have reportedly figured out a way to complete the deal in a way that does not require the transfer of the mortgages.

"It is being done in a creative way so that they don't have to wait for the amendment but it still doesn't violate the law. They would like to issue this as soon as possible," remarked a source close to the transaction. Launch date for the cryptic deal is set for the second half of this year, said a Daewoo banker. VC

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