KFB prices Korea's biggest cross-border securitization

Amid talk of HSBC takeover KFB sells €550m RMBS to European investors.

Korea First Bank has priced its latest mortgage-backed securitization at the aggressive end of the marketed range. The €550 million offer, which is the biggest ever cross-border securitization from South Korea and the largest asset-backed euro deal in Asia this year, was pitched to investors at a range of 21bp to 23bp over Euribor.

With roughly €3 billion of orders the bankers - BNP Paribas, Calyon and Royal Bank of Scotland - were able to sell the deal comfortably at the 21bp level, mainly to European investors. "The demand has been very strong since the first day of bookbuilding and we managed to tighten the pricing from the initial price talk of euribor plus 23-25bp to the final pricing of euribor plus 21bp and closed the book in four days," says a representative of the arrangers.

In total more than 50 investors took part in the deal, with just 5% of the orders coming from Asia. This low turn out from the region came in the face of rumours that HSBC's intent on buy out Newbridge Capital's 49% stake, which would lead to a general offer for the remaining government-owned stake.

KFB's story is a compelling one - the bank has been transformed since Newbridge bought its stake and took over management control in 1999. Today it has one of the most sophisticated lending and collection models in Asia. If testimony of this fact were needed it comes in the form of an Ambac Assurance guarantee, which notches the deal up to triple-A standard under all three rating agencies: Standard & Poor's, Moody's and Fitch. Credit enhancement is also provided in the form of a 10% subordination.

The bonds, sold through a special-purpose vehicle called Korea First Mortgage No. 3, are backed by a pool of 16,500 residential mortgages with a total outstanding balance of about KRW1.3 billion. The average loan size is KRW81 million and the weighted average loan-to-value ratio is 53.3% with seasoning of 9.3 months. The final legal maturity is April 2036 with a step-up date in April 2012.

The deal is KFB's second residential mortgage-backed offer this year - the first was a $500 million offer sold in March and which priced at 38bp over Libor on the triple-A tranche. That deal was also wrapped by Ambac.

Calyon is providing the swap.

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