The South Korean secondary mortgage body, Korean Mortgage Corp. (Komoco) was back in the domestic MBS market at the beginning of the month, with a W500 billion ($448 million) deal.
The deal was Komoco's second MBS and one of only a handful of mortgage-backed transactions that the country has seen so far. It was backed by 110,000 mortgages originated by National Housing Fund of the Ministry of Construction and Transportation, the country's biggest mortgage originator with a market share of over 50%.
Samsung Securities, Hana Securities and Hyundai Securities acted as lead managers and the transaction was chopped into 11 senior tranches with maturities ranging from six months to seven and a half years, said Komoco's Kwun Kyung Won. The paper was rated at triple-A by local agencies and coupon rates went from 7.38% to 9%.
All the paper was placed with local pension and investment companies, a Samsung official added. There were also two unrated subordinated pieces, which were retained by Komoco.
Komoco is 45%-owned by the Ministry of Construction with other shareholders including the International Finance Corp., the private equity arm of the World Bank and a body that has been active in promoting securitization in general and secondary mortgage bodies in particular.
Komoco was set up in 1999 in an effort to improve liquidity in the Korean housing system. It is planning to launch a third deal, which should be around the same size, before the end of the year.
Meanwhile, another Korean state institution is planning to take advantage of the booming domestic securitization market. The Korean Deposit Investment Insurance Corp. is planning to issue a deal, worth W500 billion and backed by non-performing loans purchased by an affiliated company.
The deal will be handled by Samsung Securities and SK Securities and is scheduled for a November launch. Decisions on maturity, pricing and the division into different tranches have yet to be made.
The loans were acquired by Hanarum Mutual Savings & Financial Co., an affiliated body that like the KDIC and the Korean Asset Management Co. has been charged with buying NPLs and defaulted bonds from local banks and investment companies in order to clean up the financial system.
These bodies and other government institutions have already spend $80 billion dollars cleaning up bank balance sheets and are thought to need at least another $30 billion to finish the job.
In an effort to raise some of that money, KDIC is planning an international securitization of some of its portfolio of weak assets (ASRI 5/22/2000 p.1) and has been talking to Western investment bankers. It is not known if a final decision has been made about who will handle that transaction and when it is likely to be done.