Korea's biggest insurance company, Samsung Life Insurance, which also has significant real estate and research and development businesses, has selected Morgan Stanley to lead manage its and the country's first cross-border residential mortgage backed securitization (RMBS) later this year.
Lehman Brothers and Samsung Securities have been brought in as co-arrangers on the transaction, which will securitize at least $500 million of mortgage loans from Samsung's own portfolio.
The exact size of Samsung's mortgage business is difficult to ascertain because the company does not include a breakdown of different loan types in its annual reports. However, its overall loan business had grown to $13.25 billion by the end of 2000, around $9 billion of which is accounted for by individual borrowers, and it can reasonably be assumed that a good percentage of this is residential mortgages.
In any event, Asian ABS professionals will eagerly await the transaction, as it offers further evidence of sophistication in the Korean cross-border market. Consumer asset classes such as auto loans have dominated issuance in the past year or so, and Samsung's deal will bring some welcome diversity.
Although legislation for domestic MBS issuance has existed since January 1999, the market has been slow to develop and deals have almost exclusively been launched through the Korea Mortgage Corp. (KoMoCo).
KoMoCo was established in September 1999 to provide long-term housing finance, and has used securitization to transfer mortgage loans from financial institutions into mortgage-backed bonds.
Samsung Life became involved in this process in January, when KoMoCo issued W18 billion ($15.3 million) of bonds backed by mortgages originated by Samsung. Rated triple-A by local credit rating agencies, the transaction was split into three tranches of one, three and six year maturities.
The one-year bonds carry a 5.65% nominal coupon, the three-year tranche 6.78% and the six year piece offers 7.5%.
Meanwhile, Morgan Stanley has also participated in the Korean real estate securitization market in the past year, issuing W174.94 billion of bonds through the Resurgence Korea One special purpose vehicle last October.
That deal was backed by a portfolio of non-performing mortgage loans and properties acquired by Morgan Stanley Real Estate Fund from the Korea Asset Management Company, and marked the first time such assets had been securitized in Korea.
The issue was split into three tranches, each of which has a legal maturity of four years. The W131.21 billion senior tranche, rated triple-A by local agencies, carries a fixed annual coupon of 5.57%. There is no four-year benchmark to price against, but the bonds offer a pick up of 76bp over three year treasuries and 17bp below the five year market-to-market base yield.
