Korea Air Lines (KAL), South Korea's largest air carrier and part of the Hanjin Group, has sent out RFPs for its second cross-border securitization, with bids due this week, according to a well placed source. The source added that the RFP includes no mention of deal size, as this is something the chosen bank will get an idea on when it can access KAL records.
As was the case with the airline's debut in September 2003, KAL will likely securitize future Yen-denominated Japanese ticket sales. The 27 billion ($252.6 million) issue, arranged by Nomura Securities, set several precedents. It was the first yen-denominated deal by an ex-Japan Asian issuer, the biggest tickets receivables deal and the first backed by revenues from the International Air Transport Association's billing and payments system.
The three-year amortizing notes had an average life of 1.6 years and priced at 110 basis points over Libor. The government-controlled Korea Development Bank provided a guarantee, garnering the bonds a sovereign-level rating of A minus by Fitch Ratings and Standard & Poor's.(S&P) As expected, 64% of the notes placed in Japan, 34% in ex-Japan Asia and 2% in Europe.
Asiana Airlines, a domestic competitor of KAL, followed suit in December 2003, with its own 10 billion offering via Citigroup Global Markets. Given the banks involvement on KAL and Asiana, it is not surprising Citibank and Nomura have been invited to pitch on KAL 2. Both firms also have strong Japanese businesses.
Standard Chartered, aggressive in sourcing Korean business, will also reportedly pitch. Although the bank does not have an established Japanese securitization group, it must have scored points with KAL for its recent hiring of Juhan Kim, former head of Nomura's debt capital markets team in Korea, and his associate, Michelle Cho. Both worked on KAL.
Outside of that trio, there may be some disgruntled Asian ABS bankers. On most Korean cross-border deals, the list of arrangers practically writes itself. In this case, however, many regional franchises with Korean pedigree were not invited, including Credit Suisse First Boston, Calyon Securities, Deutsche Bank Securities, HSBC Securities, ING and UBS.
It is not the first time KAL has ruffled a few feathers. Although Nomura conceived its debut, the bank was dumped in favor of SG Corporate & Investment Banking, which had worked with KAL on non-ABS deals. But when the deal was in danger of imploding, Nomura was brought back to save the day. Conversely, some of the bigger Japanese banks, including Bank of Tokyo Mitsubishi, have made the RFP list, despite their scant experience outside Japan. Yet given that it is a Korean issuer, it seems likely they may be hired in a supporting capacity for the Japanese placement, rather than as lead manager.
Elsewhere in Korea, a source involved on Korea First Bank's third cross-border MBS of 2004 said the deal should be ready to launch in late November/ early December. In September, KFB selected BNP Paribas, Calyon and Royal Bank of Scotland to handle the $500 million issue (see ASR, 10/4/04).
Seemingly everyone wants to get in on the act in Korea. For instance, global law firm Orrick, Herrington & Sutcliffe has hired as a partner Eugene Chang from one of Korea's biggest practices, Woo Yun Kang Yeong & Han. Although Chang will be nominally based out of Orrick's Tokyo office, he will focus on developing the firm's Korean securitization business, as well as seeking M&A and project finance opportunities. Curiously enough, Chang actually advised on the yen-denominated future flow deals by KAL and Asiana, mentioned previously.
"Eugene's arrival is an important step in Orrick's expansion in Asia, and will enable us to further expand our existing practices into South Korea," said Orrick CEO Ralph Baxter.
Over in Singapore, property developer Jurong Point Realty - a joint venture between Lee Kim Tanh Holdings and Guthrie GTS - has closed its debut CMBS, issued from the Winmall SPV (see ASR 10/18/04). Overseas Chinese Banking Corp. was sole lead on the S$520 million ($313 million) offering, which featured S$204 million of rated paper and S$316 million in unrated subordinated notes.
The S$73 million floating rate A tranche and S$86 million fixed rate B piece were rated triple-A by Fitch and S&P, and offer a pick up of 39 basis points over the Singapore swap offer rate (SOR) and a 2.97% coupon, respectively. The double-A rated S$9 million C-paper yielded 3.18%, while the single-A S$36 million D-bonds priced at 3.38%. In addition, the unrated S$50 million E notes priced at 145 basis points over SOR, while the S$61 million F-tranche pays 4.03%. The S$205 million subordinated G-notes will be retained by the issuer. All the tranches have expected maturities of five years and legal finals of 6.5 years. According to bankers, the deal was fully subscribed with banks, insurance companies and asset managers snapping up the bulk.
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