S&P: Solid S. Korean SF Volume Growth Expected in '02.Business Editors NEW YORK--(BUSINESS WIRE)--Standard & Poor's Feb. 11, 2002--Total issuance in South Korea's structured finance market, particularly cross-border securitizations, should experience solid growth in 2002 as the sector builds on the experience of its US$1.76 billion in deal flows in 2001 and a keen appetite by monolines for Korean consumer assets, said Diane Lam, Standard & Poor's director of Structured Finance in Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. . "We believe that Korean securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. volumes in 2002 will set new highs -- 2002 could be the year the sector takes off," Ms. Lam said, explaining, "Issuers are now familiar with the product and the investor base is increasing." Domestic investors who have shunned unsecured corporate issuances in a flight to quality continue to vote with their investment dollars, and snap up structured bonds for their inherent transparency and stable performance, Ms. Lam noted. Similarly, for cross-border transactions, foreign investors, chiefly from the U.S., Europe, and, more recently, Japan, are expressing more interest in South Korea's securitization market. The development of the securitization market in South Korea is gaining momentum from the surge of deal flow that took place in the last quarter of 2001. Transaction expertise and experience gained by both domestic and international parties have reached a critical mass, allowing transactions to close quickly, Ms. Lam said. Representing a signal of the market's development, the securitization of Samsung Capital's AHA card loan transaction, arranged by Citibank and wrapped by Financial Security Assurance (FSA FSA Financial Services Authority FSA Food Standards Agency (UK) FSA Farm Service Agency (USDA) FSA Financial Services Agency (Japan) ), required just two months to complete. Moreover, Standard & Poor's rated the first cross-border securitization in 1999 for KEXIM's export loan book, valued at US$230 million; this has been repaid in full and performance of the assets was superb, Ms. Lam said. Investors can begin to see how Korean corporate assets actually perform by looking at the performance of the deals like KEXIM KEXIM Export Import Bank of Korea , KDIC's Hanareum Funding, and other collateralized bond obligations Collateralized Bond Obligation (CBO) Investment-grade bonds backed by a collection of junk bonds with different levels of risk, called tiers, that are determined by the quality of junk bond involved. (CBOs). In December 2001, Standard & Poor's rated three South Korean transactions: Samsung Capital's AHA card loans, valued at US$300 million and rated triple-'A'; Koromas Funding Ltd., a CBO CBO See: Collateralized Bond Obligation. transaction valued at US$285 million and rated triple-'B'; and LG Card's Credipia 2001 Ltd. valued at US$500 million and rated triple-'A.' Standard & Poor's rated a total of five cross-border transactions in 2001, with a volume of US$1.76 billion. South Korea's securitization market was led in 2001 by consumer asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. , including credit card and card loans. CBOs were an important component of the market, due to the need for funding of smaller corporates, Ms. Lam said. CBO transactions are driven by government policy, she explained, and aim to provide funding to companies that cannot access bank credit easily. "In fact, without access to the debt capital markets using securitization as a funding technique," she said, "there could be more financial difficulties, corporate failures, and even higher unemployment in Korea. "The domestic and cross-border securitizations have delivered important benefits to Korean corporates, banks, and to Korea's debt capital market growth, helping to maintain an even keel keel 1. the ventrally directed large surface of the bird's sternum, the site of attachment of the major muscles of flight. Called also carina. 2. the prominent area over the sternum in Dachshunds. for Korea," Ms. Lam noted. South Korea's economy is improving, but companies and banks still must navigate through a painful restructuring program. Ms. Lam expects the readiness of monolines and swap houses to help pave the foundation for future issuances in 2002. These issuances will include the launch of new asset classes, including commercial real estate, mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. , and credit-linked notes A credit linked note (CLN) is a form of funded credit derivative. It is structured as a security with an embedded credit default swap allowing the issuer to transfer a specific credit risk to credit investors. . Ms. Lam also sees the potential for unwrapped transactions. For 2002 and beyond, Standard & Poor's said that the single most important development in the evolution of Korean securitization is the emergence of repeat issuers. The consumer finance houses in Korea unanimously see securitization as a permanent part of their funding platform, much like U.S., European, and Japanese counterparts. "We are seeing some of this already, with Samsung Capital Samsung Capital Co, Ltd. is a Korean financial company, established in 1999 with headquarters in Seoul, Korea. It was the financial services unit of Samsung. Its divisions are responsible for over 50% of Samsung Electronics revenue. having completed two transactions in the cross-border market in 2001," Ms. Lam said. |
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