© 2024 Arizent. All rights reserved.

Korea Plows Ahead With NPL Issues

Undeterred by Y2K worries and winter holidays, several South Korean banks kept busy and ended 1999 with a slew of quasi-securitizations backed by their non-performing loans. All were issued at the end of December and marked the first NPL securitizations for each issuer.

Housing & Commercial Bank launched a W128 billion ($112.8 million) issue backed by non-performing real estate loans, said a banker at Hyundai Securities, which co-arranged the issue with Daishin Securities.

The issue, via an SPC called Housing & Commercial Bank First Specialty, comprised a W100 billion senior portion and a W28 billion subordinate portion. The senior piece was split into a one-year tranche priced to yield 9.6%, and a two-year tranche with a 10.45% yield. The three-year subordinate piece was priced to yield a hefty 15%.

The issue was rated triple-A by domestic agency KMCC, based on a W100 billion, two-year line of credit supplied by Kookmin Bank. Domestic banks and investment trust companies were the main investors, said the Hyundai banker.

Close behind was Korea Exchange Bank's W60 billion issue backed by non-performing corporate loans. An SPC called KEB First Securitization Specialty Co. Ltd. issued a W40 billion senior piece split into three- and five-year tranches, and a W20 billion, five-year subordinate piece.

The three-year bonds were priced at 120 basis points over Korea's three-year corporate bond yield, while the five-year bonds were priced at 150 points over the index. Koram Bank provided a W60 billion, five-year line of credit. The issue was arranged by Salomon Smith Barney KEB Securities and sold mainly to domestic pension funds and life insurance companies, said a KEB official.

In mid-December, Kookmin Bank was the first bank to issue an NPL-backed deal (ASRI 11/29/99, p.1). The W380 billion issue comprised a W180 billion, one-year tranche priced at 9.6%, a W120 billion, two-year tranche priced at 10.6%, plus a W80 billion subordinate piece kept by the issuer.

Housing & Commercial Bank supplied the credit line, worth W150 billion over two years. The one-year tranche was rated triple-A and the two-year tranche rated single-A plus by domestic agencies. The issue was sold to pension funds, investment trusts and insurance companies, said Jae Woo Lee, a fixed income specialist at Samsung Securities, which arranged the issue with Daishin Securities.

For reprint and licensing requests for this article, click here.
MORE FROM ASSET SECURITIZATION REPORT