Field narrows for second Samsung Life international MBS

Rumours suggest a two-bank shortlist for latest securitization by Korean entity.

FinanceAsia understands that Samsung Life has short listed Lehman Brothers and Merrill Lynch as possible arrangers of its second international securitization deal, with a decision expected soon on which bank will get the mandate.

Korea's biggest life insurance company sent out RFPs to nine investment banks in April, believed to include BNP Paribas, Citibank, Deutsche Bank, HSBC, ING, Lehman Brothers, Merrill Lynch, Morgan Stanley and Nomura.

According to a banker familiar with the RFP but not on the shortlist, Samsung is expecting big things with its next deal, which could be up to $400 million in size. "The issuer has high hopes for this deal and the RFP was quite aggressive, which is not uncommon in Korea despite the difficult credit environment," the banker says. "The RFP even called for some unwrapped proposals, which I think is a big ask at the moment given the way the North Korea situation and the consumer credit problems have converged."

Another banker told FinanceAsia he had heard that one bank offered to arrange the deal at a cost of 45bp-50bp, despite the fact that Samsung Life's first cross-border deal is believed to be currently trading at around 75bp in the secondary markets. Although competition for Korean ABS mandates is fierce, it should be noted that this rumour could not be substantiated and that the banker was not referring to either of two rumoured leading candidates for the mandate.

Samsung Life brought to market in December 2002 the first ever cross-border MBS with a $299.6 million deal issued out of Bichumi Global 1, a special purpose vehicle registered in the Cayman Islands. Morgan Stanley acted as lead manager on the transaction with Lehman Brothers, Nomura and Samsung Securities brought in as co-arrangers and ING as junior co-manager. The transaction was backed by 22,781 mortgage loans originated by Samsung and was rated triple-A because of a monoline wrap provided by Ambac.

One of the major talking points surrounding Samsung Life's first MBS deal concerned the pricing, which ended up being 50bp over three month Libor. That was outside two of the 144A credit card deals from Korea that were issued last year - the $500 million offerings from KEB Card and Woori Card. KEB's transaction - arranged by CSFB - priced at 49bp while the UBS Warburg-led Woori deal priced at a discount to yield 49.8bp over Libor.

Prior to launch, bankers not involved in the deal felt that pricing should have been in the low to mid-40bp range given the quality of mortgage assets compared to credit cards. Nevertheless, Samsung Life's deal was launched into a less favourable market place at the tail end of last year. This was reflected by how the card deal issued by Kookmin Card via Banc One, launched around the same time as Samsung's MBS deal, priced at 60bp over Libor. Secondary levels for the other card deals were also around the 60bp mark when the MBS deal was launched.

The same market conditions have largely accounted for the dearth of cross-border securitization issuance from Korea so far in 2003. Fortunately however, things now seem to be looking up. Both Samsung Card and KEB Credit Services recently announced plans for international credit card deals while news of Samsung Life's plans gives credence to the banks, rating agencies and monolines that have been bullish about opportunities in the residential mortgage sector.

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