S&P Rates KDIC Subsidiary's ABS 'AAA'; Backd by AMBAC.

Business Editors

HONG KONG--(BUSINESS WIRE)--Sept. 13, 2001

Standard & Poor's-- Standard & Poor's today assigned its triple-'A' rating to Hanareum International Funding Ltd.'s US$278 million guaranteed floating rate notes. The notes are ultimately backed by a portfolio of performing leases and loans originated by 16 failed Korean merchant banks and purchased from Hanareum Mutual Savings and Finance Co. (HMSF).

The notes are guaranteed by Ambac Assurance Corp. (AMBAC), representing AMBAC's first involvement in a Korean transaction and demonstrating renewed interest on the part of monoline insurers in the Korean market. The triple-'A' rating on the notes reflects the quality of AMBAC's surety bond, which guarantees the timely payment of interest and the full repayment of principal by the transaction's legal final maturity.

This transaction also marks the end of a long hiatus of lease-backed securitizations out of Korea. Through this transaction, HMSF intends to raise US$278 million through the securitization of a static pool of performing loans and leases prior to its scheduled dissolution on Sept. 15, 2001. HMSF acquired the portfolio through a merger with Hanareum Banking Corp. (HBC). The loans and leases were originally transferred to HBC from 16 failed Korean merchant banks. HMSF is a wholly owned subsidiary of Korean Deposit Insurance Corp. (KDIC), which has been assigned a triple-'B' long-term foreign currency rating by Standard & Poor's.

The portfolio comprises leases and loans worth US$470.9 million, of which about 2.87%, or an amount equivalent to US$13.5 million, is denominated in Korean won. The portfolio consists of a carefully selected subset of well-seasoned, performing assets that have been sample audited to confirm that they meet specified legal and eligibility criteria. The transaction is also supported by a letter of commitment by KDIC relating to certain asset representations and warranties given by HMSF.

HMSF transferred all of the rights, interests, and the title to the portfolio to Hanareum 1st Receivables Ltd., a Korean-based special-purpose vehicle established for the purpose of this transaction. Hanareum 1st Receivables issued US$278 million senior notes that were purchased by Hanareum International Funding, a special-purpose company established in the Cayman Islands, and subordinated notes that were purchased by HMSF. Hanareum International Funding funded the purchase of the senior notes using the proceeds from the sale of the US$278 million rated notes. The transfer of assets in this transaction is perfected against third-party claims under Korea's ABS act.

Note payments ultimately depend on collections from the underlying loans and leases, and on the surety bond provided by AMBAC. Because HMSF is scheduled to dissolve following the closing of this transaction, servicing of the underlying receivables will be performed by KDB Capital Corp., with Deutsche Bank AG contracted as back-up servicer.