Samsung Life Insurance is gearing up to launch a cross-border RMBS transaction that is sure to make market history in Korea, as the first of its kind to emerge from the country.
Samsung has issued proposals to Credit Suisse First Boston, Lehman Brothers and Morgan Stanley and the investment bank will likely be mandated this week or next, sources say. Given the preliminary stage of the transaction, the specifics, including structure, rating and size remain to be seen.
Sources say the deal is not expected to close until the fourth quarter, since it is the first international RMBS transaction in Korea and it will take the involved parties time to become better acquainted with credit issues.
"Mortgages in Korea have some features which distinguish them from other markets," said Ben McCarthy, an analyst at Fitch Ratings. "My impression is that [they] will be able to be structured around [these features] so that global investors will be able to feel comfortable with the asset class."
According to McCarthy, the Korean mortgage market has historically been dominated by two institutions including Housing & Commercial Bank (now Kookmin) and National Housing Fund (NHF) - and despite the diversification away from these institutions in the mid 1990's, they still dominate the market with about a 90% market share.
Korea has an active domestic securitization market with credit card transactions as the predominant asset type. "Three mandates to investment banks have been awarded this year and a fourth request for proposal has gone out this week," McCarthy said. "So the pipeline of credit card deals looks pretty strong."
And, as one of the largest domestic securitization markets in the world, McCarthy also noted that the country has a growing presence in the international market mainly through consumer finance and credit card transactions. The majority of international transactions in Korea have featured a wrap from a monoline insurer.
"Competition is now open and non-bank originators have started to make an impact so we would expect [international RMBS] to be a growing market although it may take some time to develop into an asset class to rival credit cards in international securitization," McCarthy said.