J.P. Morgan's securities arm Chase Securities recently closed what it said was the first future flow securitization from South Korea and the first airline-ticket receivables ABS from Asia since 1997's financial crisis.
The $65 million privately placed deal parcels current and future ticket receivables generated in North America by Asiana Airlines, Korea's second largest airline, and paid via American Express, Diners Club, Visa and Mastercard, plus certain cash sales.
The transaction issues fixed-rate notes due 2005, via an Irish SPV (most offshore Korean deals use Dublin-based SPVs because of the double taxation treaty between the two countries) called OZ Receivables. Further terms of the deal were not released.
The notes were rated at BB by Fitch, a notch above the airlines own BB-, thanks to the fundamental strength of ticket-backed deals, which the agency believes are likely to continue to perform even if the airline is in trouble and is forced to reschedule its unsecured debts.
That strength has been demonstrated in several deals in the past: a deal arranged by Chase for Philippine Airlines survived a restructuring of the airline's debts and deals for Aeromexico and Varig were also unaffected by similar problems.
It is the first offering from the airlines newly established securitization program and has been along time in the making. The deal was structured and rated at the end of September last year, but has not surfaced until now. However, there are prospects that another issue will come soon, possibly of around $30 million.
"This issue clearly demonstrates the strength of Asiana as a growing franchise with a successful business model," said Paul Burke, head of global securitized finance in the Asia Pacific for Chase. "[It] represents a milestone in the regional cross-border ABS market [and] we expect to see more future flow deals come to the market in the region in 2001."
Bankers said that the airline has been attempting to get such a deal away for a couple of years and the mandate has been with other banks before it came to Chase, as it has few other ways to raise funds because the Korean straight bond market is all but closed to relatively lowly rated issuers.
Asiana's chief financial officer, BW Ghil, confirmed the importance of the deal, saying that it gave the company the opportunity to tell its story to international investors.