Kookmin Card, one of Korea's biggest credit card companies, hopes to launch the next part of its $1 billion securitization fundraising for 2002 with a $500 million deal via Banc One Capital Markets in the second week of December. A company official says it has been waiting until the swap market was more favourable before launching the transaction.
Earlier this month, Kookmin completed a transaction for the same amount with ING acting as sole lead manager.
ING will act as swap provider for the company's second issue, which will be launched out of the Kookmin Credit Card 2002-1 special purpose vehicle (SPV), registered in the Cayman Islands.
The latest deal securitizes a revolving pool of credit card receivables, which currently consist of 519,799 accounts with an aggregate balance of around W991.4 billion ($814.8 million).
As with the ING-led deal, Banc One employed the standard structure for cross-border securitizations from Korea. Essentially, Kookmin sells the card receivables to a Korean incorporated SPV, Kookmin Credit Card Securitization 2002-1 (the purchaser), which then issues a $500 million bond to the Cayman Islands SPV, and swaps the proceeds into Won to buy an equivalent amount of receivables.
In addition, the purchaser - via a Korean trust - issues a subordinated bond to be retained by the originator, which is equal to 23% credit support for the deal. Additional credit enhancement will come from a cash reserve and 6% seller interest, which will absorb any dilutions and fluctuations to the size of the underlying pool.
The transaction features a 4.5 year revolving period, during which time interest is paid monthly, followed by a six month controlled amortization period.
Unlike the ING issue, Kookmin's transaction with Banc One does feature a third party wrap from the monoline insurer MBIA Insurance Corp. This enabled the transaction to get triple-A ratings from both Moody's and S&P
Kookmin's previous deal was unwrapped. However, the AA/Aa3 ratings attained from Fitch and Moody's made it to date the highest rated unwrapped Korean cross-border securitization.
When the deal was launched, sources close to the deal said that the decision to take the unwrapped route was done for cost reasons. Kookmin revealed that the all-in cost for the deal - sold into a conduit - was 80bp over Libor. With monoline fees of around 35bp added to pricing of just inside 50bp for the two public transactions done this year, Kookmin achieved savings of around 4bp.
Bankers involved on the two public deals would nonetheless argue that 144A transactions still present the best route for clients, giving them access to a broader group of investors, which should enable tighter pricing for repeat deals.
Korea Exchange Bank issued a $500 million deal in August via CSFB. The transaction had a 4.5-year average life and priced at par with a coupon of 49bp over Libor. Woori followed KEB earlier this month with its own $500 million offering, led by UBS Warburg. The Woori bonds, which have average lives of 4.64 years, priced at 99.778%, with a nominal coupon of 45bp over Libor, giving an effective spread of around 49.80bp.
