The Korea Asset Management Corp. (Kamco), the government agency mandated with cleaning up domestic banks, launched its third non-performing loan backed securitization last week.

The latest issue from Kamco Mirae 99-3 ABS Specialty Co. Ltd. totaled W223 billion ($188.6 million) and comprised five tranches of senior bonds totaling W205, plus a subordinate piece worth W18 billion and kept by the issuer.

A one-year, W10 billion tranche was priced at 0.18% less the three-year corporate bond index; a two-year, W40 billion tranche was priced at 0.52% over the three-year corporate bond index; a three-year, W40 billion tranche was priced at 0.67% over the three-year corporate bond index; a five-year, W80 billion tranche was priced at 1.1% over the average of the prime rates of the originating banks; and a seven-year, W35 billion tranche was priced at 2.12% over the three-year corporate bond index.

The securitized assets were non-performing loans purchased from eight banks: Chohung Bank, Korea Exchange Bank, Shinhan Bank, Hanvit Bank, Korea Development Bank, Nonghyup Bank, Kookmin Bank, and Pusan Bank. Domestic firms Hyundai Securities and Hanwha Securities co-arranged the transaction.

The top three pieces were rated triple-A by domestic agencies Korean Investors Service (KIS) and KMCC, while the five and seven-year tranches were rated double-A plus by KIS and double-A by KMCC.

Korean securitizations are usually structured with recourse back to the seller and rated on the strength of a third-party guarantee; here it was a W100 billion, seven-year line of credit from Korean Development Bank.

As in its two previous NPL-backed deals, Kamco has the right to exercise put options to the originating banks, designed to put pressure on the banks to ensure that obligors make timely repayments. It was placed with domestic banks and insurance companies and well-received, said a Kamco official.

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