Kookmin Bank, South Korea's largest commercial bank, has invited international arrangers to bid on a $1 billion cross-border residential mortgage-backed offering. A small number of banks - believed to include ABN Amro, Calyon, Citigroup Global Markets, HSBC, JPMorgan Securities and Standard Chartered - are competing for what will be Kookmin's debut RMBS, scheduled for launch early in 2007.
If successful, bankers believe Kookmin could be followed to market by several other mortgage originators including Hana Bank, Samsung Life, Shinhan Bank and Woori Bank.
"This is a huge deal as Kookmin is the largest housing bank in Korea," a banker familiar with the mandate said. Further, "if the example of consumer finance ABS is any guide, Korean issuers seem to follow each other. There could be a real rush in 2007."
Surprisingly, the cross-border RMBS market has never really taken off, although Korea has supplied consistent consumer finance ABS transactions over several years. Samsung Life issued a $299 million deal in December 2002, but has thus far not returned to market.
There can be no doubt the success of Standard Chartered First Bank's (SCFB) offshore MBS program is the single biggest reason Korean banks are interested in coming to market now.
Since April 2004, SCFB - formerly known as Korea First Bank until a takeover last year by Hong Kong and London-listed Standard Chartered - has sold six cross-border RMBS deals.
The most recent of these, a $1.3 billion dual currency (dollars and euros) issue completed in November, was hugely significant. With the issue, ex-Japan Asia's largest ever cash securitization, SCFB proved it was possible to sell a $1 billion-plus offering without needing a monoline wrap.
This was facilitated by the rating agencies' assignment of standalone triple-A ratings to Korean deals structured with sufficient credit support. Even so, the fact that SCFB achieved spreads of 16 and 20 basis points for the 1.6-year and 3.2-year senior pieces was testimony to the borrower's standing among international investors.
With tight pricing available in both public and conduit markets, it is not surprising that SCFB's competitors are keen to follow suit. However, for best price execution, one banker said Kookmin might benefit from a wrap with its first offering.
"It would be a safe first step, familiarizing investors with its credit history and origination program before issuing unwrapped deals at a later date," the banker said.
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