Samsung Capital, the Korean consumer finance company, yesterday launched its fifth cross-border securitization. ING Debt Products is acting as sole arranger, structuring agent and lead manager on the $210 million deal, which is backed by a portfolio of revolving consumer loans.
To some extent, ING could be seen as stepping into the breech with this deal. Samsung mandated Merrill Lynch in August to arrange a $400 million unsecured consumer loans deal, with the expectation of completing the transaction by years end. However, that deal has now been put on hold until next year.
Samsung officials say that poor sentiment in the US markets is the reason for the delay. However, some ABS bankers say that another reason why Samsung's deal with Merrill has been put on the back burner is that Ambac, the monoline insurer, has decided not to provide a third party guarantee due to concerns about consumer finance in Korea. The sector has experienced rapid growth in the past two years, but rising defaults suggest this may not be sustainable. Ambac's involvement would bring a deal up to triple-A status, making it easier to sell to foreign investors.
There should be no such problem closing the transaction with ING, which presumably will be sold to institutional investors through private placement or as a conduit deal.
As the bonds - sold through Samsung Capital Aha 2002-1 Ltd, a Cayman-Islands registered special purpose vehicle û will be unwrapped, ING deemed it necessary to get ratings from all three international credit rating agencies, a first for the Korean cross-border market. The notes are rated AA by Fitch, Aa3 by Moody's and AA- by Standard & Poor's.
ING declined to give pricing details about the deal, which has a final maturity of four years and expected average life of 3.25 years. The transaction structure has a 30-month revolving period, in which only interest is paid each month, followed by an 18-month controlled amortization period, during which time principal will be paid monthly.
As was the case with Samsung Capital's third issue in November 2001, the company's fifth deal will securitize revolving consumer loans extended through its Aha loan card product. The previous transaction, rated triple-A by Moody's and S&P because of a wrap provided by Financial Security Assurance, was arranged by Citibank and priced at 57.5bp over Libor.
ING acted as lead manager on Samsung's first two cross-border deals, a $200 million conduit offering in March 2001 backed by auto loans, which was followed in September that year by a $234 million consumer loans securitization that placed privately.
The company issued its fourth deal û and first publicly offered cross-border issue û in May this year with a $296 million auto loans transaction. Merrill Lynch acted as sole lead manager on the deal, launched out of the Samsung Capital Auto 2002-1 special purpose vehicle, registered in the Cayman Islands.
Rated triple-A by Moody's and S&P because of an FSA wrap, the bonds have expected average lives of four years and priced at 36bp over one month Libor, coming in 2bp from the tight end of initial price talk (38bp to 40bp over). Sources close to the deal told FinanceAsia at the time that it was three times oversubscribed, sold to 14 accounts, with 70% placement in the United States and the rest split between Asian and European buyers.