Korea Asset Fndg 2000-1 Ltd Notes Exp `BBB+' Rtg From Fitch.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 6, 2000

Upon satisfactory receipt of final legal documentation Fitch expects to assign a `BBB+' rating to $367 million secured floating rate notes due 2009 (the `Issuer Notes') to be issued by Korea Asset Funding 2000-1 Limited (the `Issuer'), a Cayman Islands incorporated special purpose entity. The rating addresses timely payment of interest and ultimate payment of principal by the final legal maturity date.

The proceeds of the Issuer Notes will be used to purchase equivalent $367 million of senior floating rate notes due 2009 (the `Purchaser Senior Notes') to be issued by Korea 1st International ABS Specialty Co., Ltd (the `Purchaser'), a bankruptcy-remote, special purpose entity incorporated in S. Korea. The Purchaser, using the proceeds from the issue of Purchaser Senior Notes and an additional $52.96 million in subordinated notes, will purchase a portfolio of restructured non-performing loans (`Loan Portfolio') from the Korea Asset Management Corporation (`KAMCO'). The Loan Portfolio is expected to be valued at $419.96 million based upon a report to be filed with the Korean regulatory authority, Financial Supervisory Commission.

KAMCO, established in 1962, is currently the principal governmental agency responsible for acquiring, managing and disposing of non-performing loans and the distressed assets of Korean financial institutions, the role for which it was mandated in 1997.

The Loan Portfolio is composed of non-performing loans that have been restructured under corporate reorganizations, composition acts, or commercial agreement pursuant to S. Korean law. All the underlying loans incorporate recourse provisions to each originating S. Korean banks (`Put Option Banks'). Under the recourse, a put option can be exercised in case borrowers fail to follow the restructured payment schedule (or in certain other conditions).

The `BBB+' rating assigned to the Issuer Notes is primarily based on the following:

-- The close linkage of the transaction rating to Korean

Development Bank's (`KDB') credit risk (BBB+) as KDB accounts

for bulk of the put options (60%); and also provides a credit

facility, initially equal to 30% of the Issuer Notes (the

`credit facility');

-- The reliance on the Put Option Banks as the main source of

payments, as Fitch has only given marginal benefit for obligor 

payments under the Loan Portfolio;

-- The overall credit quality of all the Put Option Banks and

their importance in the S. Korean economy;

-- The aggregate transaction-level credit enhancement (in

addition to the Loan Portfolio put option support) in the form

of subordination and the KDB credit facility;

-- The fast pay amortization structure coupled with the credit

facility amortization schedule, ensures that the transaction

credit enhancement (as a percentage of outstanding Issuer

Notes) increases as the Issuer Notes principal is repaid;

-- The integrity of Issuer Notes repayment under various stressed

cash-flow scenarios (combinations of loan obligor as well as

Put Option Bank(s) defaults) commensurate to the transaction

rating;

-- The support of currency and interest rate swaps provided by

Deutsche Bank A.G. and UBS AG to mitigate certain currency and

basis risks in the transaction.

-- The strong overall legal and payment structure of the

transaction, supported by the requisite legal and tax

opinions; and

-- The servicing support provided by KAMCO is adequate and Fitch

views KAMCO's experience in domestic securitizations as an

added advantage.

Fitch's current S. Korea long-term foreign currency (`FC') sovereign rating of `BBB+' caps the rating on the Issuer Notes to `BBB+'. Because of the transaction's strong credit reliance on the Put Option banks, especially KDB, through the put back option and the credit facility, Fitch expects that the transaction rating will closely mirror S. Korea's sovereign FC rating. Negative and/or positive developments that directly affect S. Korean sovereign risk will have a material impact on the rating of the Issuer Notes.

The principal asset of the Issuer will be the Purchaser's Senior Notes and will have the benefit of pledge on the underlying Loan Portfolio assets including related loan agreements, put option rights and certain other transaction documents. The main source of repayments of the Issuer Notes will be payment of Purchaser Senior Notes yield and principal, which in turn is dependent on interest and principal collections from the Loan Portfolio and/or put option payments from the Put Option banks (in case of default under the Loan Portfolio).

The repayment on the Issuer Notes will follow full sequential fast pay amortization. No repayments will be made on the Purchaser's Subordinated Notes until the Purchaser's Senior Notes and the Issuer Senior Notes have been fully repaid. An expected repayment schedule for the Issuer Notes has been defined. Any shortfall (principal, interest, hedging and certain other transaction costs) from the expected schedule will be met with draws under the credit facility. Any collections exceeding the amount required as per expected schedule will be used to pay down the Issuer Notes.

Nearly 91% of Loan Portfolio is comprised of U.S. dollar denominated (balance is yen denominated). 59.9% of the put backs relate to KDB (rated `BBB+'). The other main Put Option Banks include 19.0% to the Korean Exchange Bank and 6.2% to Hanvit Bank (both rated `BBB-'); 12.0% to Cho Hung Bank (shadow rated `BBB-'), 2.3% to Shinhan Bank and 0.6% to Kookmin Bank (both shadow rated `BBB'). The put option price is based on discounting of future cash flows.

Fitch premised the various cash flow stress scenarios on the fact that the underlying loans have all been restructured due to the financially distressed nature of the borrowers. Therefore, the payments under these loans have been drastically reduced (Fitch assumed that nearly 75% of obligors would default, with no recoveries). The Put Option Banks' ability to make payments is, therefore, critical in the transaction analysis. Fitch analyzed the transaction primarily based on the Put Option Bank's credit strength. The transaction cash flows withstood stress cases that incorporated a default of weakest Put Option Bank(s) (in this case the `BBB-' rated bank(s)) with the largest exposure in the Loan Portfolio, including a hypothetical merged entity composed of three banks. Fitch considers the subordination level incorporated and credit facility provided by KDB are sufficient to pay the Issuer Notes by their final legal maturity date.

All the obligors and Put Option Banks will be issued a notice of assignment for the sale and the pledge, and will be required to make payments directly into the Purchaser collection account. This mitigates any co-mingling risk of the transaction. KAMCO, as master servicer, will provide services of collection and management in relation to the Loan Portfolio. Fitch considers KAMCO's experience as the primary servicer in similar domestic securitization transactions, and non-performing loans' auctions, as positive for the transaction.

A detailed pre sale report on the transaction will be posted on Fitch's web site soon (`www.fitchratings.com').

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.