Korea First Bank, last year's most prolific cross-border issuer from ex-Japan Asia, last week selected arrangers for what will be its fourth international MBS. Although 14 banks were invited to pitch, the selection of joint leads Calyon Securities, Royal Bank of Scotland and Standard Chartered did not come as a surprise to most observers.
Calyon and RBS (along with BNP Paribas) were involved in KFB's December deal, a 550 million ($717 million) blowout that proved popular with European buyers (see ASR, 12/6/05). The pricing of the 3.09-year Ambac-wrapped deal was Euribor plus 21 basis points, comfortably a new benchmark for the Korean cross-border market. Officials at the issuer were highly impressed with the efforts of all three leads, particularly as some rival banks had told KFB pre-launch its pricing goals were unattainable.
Meanwhile, following StanChart's surprising move in January to purchase KFB from the Republic of Korea and U.S. private equity group Newbridge Capital in January, rival ABS bankers sensed it was certain to be involved on KFB's next deal.
HSBC was also in talks to buy KFB late last year - Korea's seventh largest bank with assets of W44.1 trillion ($42 billion) - but when talks broke down, StanChart moved in with its $3.3 billion bid, although the takeover is still subject to regulatory approval. Completion is expected on April 15.
If, as expected, StanChart will be involved on all KFB deals going forward, it will greatly benefit its Asian ABS franchise. The team, headed by Warren Lee, has already established a presence arranging Korean consumer finance deals for companies such as Hyundai Capital. Being associated with what is widely considered Korea's best run bank can only help solidify StanChart's position in the region.
KFB officials declined to comment on the size or likely launch date, but bankers familiar with the mandate report the transaction will likely be a public deal "very similar to the last one."
The monoline insurers Financial Security Assurance last week took a big step in boosting its Asian presence by hiring Diane Lam as a director in its Singapore office. Lam is a veteran of the Asian ABS scene, spending several years as director and team leader of Standard & Poor's Asian structured finance group before leaving the agency last October.
In her new post, Lam will be responsible for FSA's involvement in a broad range of Asian structured finance deals, including ABS, RMBS, CDOs and infrastructure financing. She will report to Michael Horn, managing director of FSA's Asian operations.
"Diane brings a wealth of experience in Asian securitization markets to the position," said Horn. "In addition to her broad technical and analytical skills, she understands FSA's business and the markets well."
Most bankers said FSA made a smart move hiring Lam, regarding her as one of the most knowledgeable people on Asian securitization. There is also a feeling that FSA needs to do something to reestablish itself in Asia after a lean couple of years. On the recent Asian cross-border deals that have featured a monoline wrap, most of them coming from Korea, Ambac has underwritten the most business.
FSA was heavily involved on the credit card transactions that dominated the scene in 2001 and 2002, wrapping deals for KEB Card, LG Card and Woori Card. However, when the card companies experienced hardships when a consumer credit crisis engulfed Korea in late 2002 and throughout 2003, some bankers feel FSA imposed too severe conditions on the issuers.
"While some of the financial ratio triggers were breached on the previous card deals, these had no relevance to the asset pool, but FSA imposed very strict covenants on them," explains one head of ex-Japan Asian ABS. "In order for the deals not to early amortize, the card companies had to post additional collateral as well as pay a step-up premium, even though the portfolios performed well. Eventually all the card companies collapsed the deals."
"The card issuers were all upset FSA imposed such harsh restructuring demands," claims another banker. "Ambac and MBIA have become more favored, but I think hiring [Diane Lam] could help bring them back as she established relationships with a lot of Korean issuers when she was at S&P."
Elsewhere, AEON Thana Sinsap, the Thai subsidiary of Japan's AEON Credit Service Co., completed last Thursday its THB2 billion ($52 million) securitization of credit card receivables (see ASR, 1/31/05). Citigroup Global Markets arranged the deal, backed by a 250,000 account pool worth THB3 billion.
The private placement featured two THB1 billion fixed-rate soft bullet tranches; both assigned local ratings of AAA' by Fitch Ratings. The three-year A1 debentures priced at 70 basis points over government bonds, or 4.03%, while the five-year A2 tranche offers a coupon of 4.92%, 85 points over comparable government paper. Pricing was comfortably inside the anticipated 100 basis point spread reported in some local media outlets.
Twenty-two accounts placed orders for the deal, leading to a three-times oversubscription rate on the A1 paper and 2.2-times oversubscription on the A2 tranche, with the debentures eventually allotted to 12 investors, according to Citigroup. Citigroup recorded interest from mutual funds, insurance companies, pension funds, private funds and financial institutions.
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