Korea's Standard Chartered First Bank (SCFB), ex-Japan Asia's most active residential mortgage-backed issuer, is looking to set a new benchmark for unwrapped public offerings in the asset class with its latest deal.
At $1.2 billion equivalent, the issue, arranged by SCFB's parent Standard Chartered Bank, will be the region's largest ever cash securitization.
Sold through the Cayman Islands-domiciled Korea First Mortgage SPV, SCFB's deal - its sixth cross-border RMBS - is backed by 12,156 loans with a weighted average LTV of 54.7% and seasoning of 16.1 months.
The senior notes will be sold in U.S. dollars and euros, with final tranche size dependent on market demand. Fitch Ratings and Moody's Investor's Service assigned triple-A ratings to the $570 million A1 tranche, which has a 1.8-year average life, and the $570 million A2 notes, which have a 3.7-year life.
In addition, $63 million of six-year B-class bonds are rated AA'/'Aa2'. The $33 million C-paper and $27 million D-tranche - both carrying 6.1-year average lives - are respectively rated A'/'A2' and BBB'/'Baa2'.
According to reliable sources, initial price talk for the shorter-dated senior notes is in the mid-teens over Libor/Euribor, while SCFB hopes to achieve a spread in the late teens for the longer senior tranche. Spreads for the subordinate tranches go out to the 80 point region for the triple-B piece.
While SCFB is a familiar and respected credit with Asian and European buyers, some bankers view its pricing expectations as ambitious. The price guidance is roughly in line with where its last public deal priced - a $650 million offering in April. However, that deal featured a monoline wrap from MBIA, while the North Korean political situation was not as tense as it is currently.
"I would expect some revision outwards of those levels," one market veteran said. "On a relative basis, investors will compare this deal against other ABS issues. These spreads are only just outside where Aussie RMBS trades. No doubt SCFB is a better name than other Korean borrowers, but investors would rather buy Aussie deals at those levels."
Staying in Korea, the country's biggest air carrier Korea Air Lines (KAL) has appointed HSBC to arrange its third international securitization. As with KAL's first two offerings, the 40 billion ($336.8 million) deal will be backed by cargo and ticket receivables on its Korea-Japan routes. According to sources, the company is looking at a range of credit guarantors, with Korea Development Bank the most likely provider.
Sources indicate HSBC put in an aggressive bid to beat off competition from Citigroup Global Markets and Nomura Securities, arrangers of KAL's first two securitizations.
The mandate confirms HSBC is regaining its status as Asia's leading arranger - at least in volume terms. So far in 2006, the bank has been involved in deals by Thailand's Dhanarak Asset Management, Singapore's CapitaCommercial Trust and CapitaMall Trust. HSBC is also working on live mandates for Hong Kong's GZI REIT and Hong Kong Mortgage Corp.
Elsewhere, Standard Chartered Bank (SCB), the Hong Kong and London-listed emerging markets specialist, has begun premarketing its third synthetic CLO, which will be sold via its Start program. SCB has again hired Lehman Brothers as arranger, having employed the bank on its second CLO, a $1.6 billion deal completed in June.
According to a reliable source, total transaction size is yet to be finalized, but the deal will be backed by around 400 corporate loans extended to Asian and Middle East credits.
The source said SCB will retain the 1% most junior piece, and is currently sounding out investors for the next 6% of unrated notes, which could offer potential yields of between 17% and 19%. Once arrangements with investors have been made for this subordinated piece, SCB will begin finalizing the rated part of the deal.
"Those yields are obviously dependent on there being no defaults," the source explained. "With this kind of portfolio, you would expect at least a couple of defaults. So there is real risk on the sub-piece, but investors will be properly compensated for it."
Thai TV funding
Meanwhile, in Thailand, the country's Chaiyo Production, a diverse business group with interests in television and advertising, is looking at securitization to fund new investments.
The company earns most of its revenue from holding the copyright to Ultraman outside Japan. Ultraman is a Japanese children's TV show popular throughout Asia.
Over the next five years, Chaiyo wants to raise up to THB450 million ($12.2 million), with proceeds used to construct an Ultraman museum, and TV studio and produce new TV programs.
According to sources, the company is looking at securitizing the licensing income from the Ultraman copyright. While copyright-backed securitization is common in Japan, this would mark the first use of the asset class from the rest of Asia.
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