Investors have snapped up Hyundai Capital's $300 million auto-loan securitization. The company is a subsidiary of Hyundai Motors and the first in Korea to sell a deal of this kind without the need for a monoline insurer.
The bonds are split into two $150 million tranches: the class A1 notes, with an expected maturity date of June 2005, a legal maturity of October 2008 and a weighted average life of 0.55 years, and the class A2 notes, with an expected maturity of August 2006, a legal maturity of October 2008 and an average life of 1.58 years. The class A1 notes are priced at 35bp over one-month Libor and the A2 notes at 51bp.
The 53,878 auto loans backing the deal have an 8.15% weighted average interest rate and are on average 2.35 months into repayment with 31 months outstanding.
The deal is arranged by Standard Chartered, which also arranged Hyundai Capital's $228 million issue in December 2003, is rated Aa3 by Moody's and is expected to mature in August 2004. Korea's sovereign rating is A3/A-. Warren Lee, Asian securitization head for StanChart, says this is the first offshore sale of sequential paying notes by a Korean issuer that has not featured credit enhancement from a monoline insurer.
Even without such credit enhancement, regional investors have responded well to the deal. "There was such strong interest from Asian investors that there was no necessity to woo European or US investors," he comments.
It is easy to see why investors like the company (this is its third deal since February 2003): it dominates Korea's $8.6 billion auto-finance industry with a positively monopolistic 70% of the market. But, perhaps more important, the deal is also supported by a subordinated tranche that amounts to 27% of the loan pool being securitized, which is more than investors would normally expect from a similarly rated Korean deal.
The deal is structured with two special purpose vehicles, the typical fashion for Korean ABS deals. The Korean limited liability company Autopia Twentieth Securitization Speciality Co will issue the notes through the Cayman-registered Hyundai Capital Auto Funding II.