Two of Korea's biggest credit card originators, Samsung Card and LG Card, are planning another raid on the cross-border ABS market, sources told ASR last week. Samsung Card is working with Royal Bank of Scotland on its deal, with launch likely in November, a source said. RBS provided a $300 million loan facility for the issuer in July, backed by auto loan receivables.
LG Card, meanwhile, has been linked with Merrill Lynch on another private placement ABS. It would be the third time the investment bank has put together a deal for the issuer. The most recent 3.25-year offering priced at 35 basis points over Libor. Sources speculated Merrill was sole investor on both transactions. The RBS-led deal will be Samsung Card's third ABS of 2005.
Both companies were seriously damaged by the consumer credit crunch that hit Korea in 2002/2003, requiring emergency injections of capital from government agencies. Although Samsung is still struggling, LG Card's performance has improved sharply in the past year.
The company posted a net profit of W479.8 billion ($468 million) in 2Q, its third straight profitable quarter, and has attracted attention from several domestic and foreign firms looking to potentially acquire LG.
Elsewhere, Japanese ABS looks set for another record year. According to the latest research from Merrill, issuance reached Y4.8 trillion ($43.4 billion) at the end of August. That is well on course to top the Y5 trillion totaled in 2004, itself a record, and the Y5.8 trillion initially predicted by Merrill.
With several private sector RMBS in the pipeline and CMBS still strong, 4Q is likely to be busy for both new issues and refinancing.
The only business with flat growth are REITs. A recent poll conducted by Japan's Association for Real Estate Securitization suggests interest in REIT products is falling among insurance companies, trusts and banks, wary that the recent rise in prices could inflate another property bubble. Poll results showed 68% of respondents invest in REITs, a 10% fall from 2004.
However, ABS bankers do not expect the high demand for MBS products to tail off soon. "Recent spreads would indicate there is still plenty of interest in both RMBS and CMBS sectors, and interest rates need to rise significantly before the securitization market starts to adjust in terms of pricing," a banker said.
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