This page updated regularly deals with securitization developments in Korea. If you have any news or development to contribute to this, please write to me.
More on securitisation in Korea
added 15th Feb 2002
According to a press release of Standard and Poor's, the volume in 2001 reached USD 1.76 billion. The rating agency expects a flurry of activity in 2002.
added 3rd Jan 2002
News item on our news page reviews latest activity in Sept and October 2002 including link to Rob Davies article on Morgan Stanley's recent NPL securitization in Korea – click here.
added 11th May 2001
KoMoCo has issued MBS in which IFC participated – see a news item on this site here.
added 7th May 2001
Primary CBOs: A new trend in Korea
Encouraged by the country's central bank, a new trend in Korea is primary market CBOs, essentially devised to enable companies with weaker credit ratings to raise resources from capital markets rather than from the credit-sqeezed banking system. See our news report here.
Added 30th March, 2001
See our newsletter for March 2001 for a credit enhanced crossborder issue of auto loan backed securitisation from Korea – click here.
Added 10th Nov., 2000:
Korean Mortgage Corporation has already begun issuance of bonds. The Corporation has also signed technical assistance contract with international majors. Click here for a news report on this site.
4th April, 2000:
Credit Lyonnais helped KDB Capital Corporation to raise some USD 144 million by securitization of lease receivables.Click here for the news item.
16th March, 2000:
Sogeko, a Korean leasing and lending company, recently securitized its lease and loan receivables in what is regarded as the first cross border securitization originating from Korea, consisting of domestic Korean assets – click here for a news item.
15th Feb, 2000:
Korean asset management company proposes to acquire bad loans and securitise the same – see news report here.
State of the Market:
Prior to the Asian crisis of 1997, some securitisation deals in Korea were being talked about but nothing much happened.
Activity in securitisation market has started picking up during 1999. One of the most high profile transactions was the Dec. 1998 deal by Korean Exim Bank. The bank is engaged in financing overseas operations of Korean companies and has receivables in foreign exchange. The bank securitised USD 265 million worth of these receivables representing promissory notes drawn by its clients. The senior notes in this transaction were rated AAA and were funded at 1.5% above LIBOR.
In Feb 1999, Industrial Bank of Korea also securitised its international loan receivables in a USD 106 million transaction. The deal was guaranteed by FSA, a monoline insurance company.
Yet another significant initiative from the Govt. is the setting up of a mortgage-securitization body, on the lines of Fannie Mae. Called Korea Mortgage Corp. (KOMOCO), it will be a joint venture with International Financial Corp. (IFC) and some domestic banks. KOMOCO is expected to issue MBSs collateralized by mortgage loans acquired from National Housing Fund (NHF) in the first half of this year.
CLO issues are expected to be the most active area for this year and the next. The government has set up Korea Asset Management Co. (KAMCO) to procure non-performing loans from banks as a measure to stabilize the financial system – see news item here. KAMCO is planning to issue CLOs and accumulated huge exposure to Southeast Asia, East Europe and Russia, most of which became non-performing after the crisis. KAMCO has very ambitious plan for year 2000 – its target for 2000 is to sell 17 trillion worth non-performing loans.
Prior to the crisis, one of the main reasons for low scale of activity in securitisation was Korean law. During 1998, Korea issued Asset Backed Securitisation Law. Full text of the law has been placed under the Securitisation laws section of our site – click here to view.
The law is primarily intended to cover securitizations originated by financial institutions. The coverage is very wide indeed. Financial institutions include government-promoted financial institutions such as Korea Development Bank, Korean Exim Bank, Industrial Bank of Korea, licensed financial institutions, merchant banks, insurance companies, securities companies, trust companies, etc.
The SPV that will hold the receivables will be organised as a limited liability company. The only business of the company will be to hold receivables. Servicing functions may be delegated to the originator but the management of securitised assets etc will be within the control of the SPV.
The securities to be issued by the SPV may be in the form of investment certificates, bonds, trust certificates, etc.
The financial supervisory body (Financial Supervisory Commission) maintains control over securitization by Korean companies – all originators proposing to securitise must register their plan with the Commission. FSC has power to refuse registration or demand amendments. The transfer of receivables by the originator will also require registration with the FSC.
The general legal system in Korea would require debtor notification for any transfer of receivables. This position substantively remains the same even under the securitisation law. Debtor notification, or consent, is required under this law.
KAMCO's securitisation of non-performing loans:
Korean Asset Management Company (KAMCO) came out with a securitization of non-performing assets which was regarded as a landmark issuance of year 2000 from Asia. See more links and news reports on this transaction here.
We organised a web-chat on the deal with participation from Fitch and Deutsche Bank representatives. See the transcript of the chat here.
See for a link to an article discussing the legal features of Kamco's transaction.