Samsung Card ponders over next ABS

Korean issuer considers fourth international securitization, but pricing concerns could see it choose domestic route.

Samsung Card, Korea's biggest credit card originator with assets of over $5 billion, has still to make a decision on whether to go ahead with its fourth international securitization. The company sent out request for proposals to foreign investment banks at the back end of last year with the usual suspects such as CSFB, Deutsche Bank, ING, JPMorgan, Merrill Lynch, Morgan Stanley, Salomon Smith Barney and UBS Warburg believed to be invited to pitch.

According to bankers familiar with the mandate, the RFP sought proposals for both conduit/private placement deals and public term deals.

However, bankers say that Samsung is mulling over whether to go ahead with the deal due to concerns over pricing. One fear is that if it decides to go the conduit route - which it has done with two previous deals - any changes to accountancy rules regarding conduits, something that regulators across the globe are looking at very seriously, could result in extra contingency costs for issuers.

On the other hand, the public route does not look as appealing now for credit card transactions as it did at this time last year. Growing concerns over default rates in the Korean credit card and consumer finance markets impacted the securitization market in the fourth quarter of 2002.

When Kookmin Card issued its second deal in 2002 through Banc One in early December, spreads had shifted out to 60bp over Libor. This was 10bp outside similar sized offerings earlier in the year from Korea Exchange Bank - via CSFB - and Woori Card's deal led by UBS Warburg. Kookmin also had to cut the intended deal size in half to $250 million, a fact that rival bankers attributed to either lack of demand or Korean regulators clamping down on how much companies can raise in offshore markets.

Consequently, some bankers are unoptimistic about the chances of Samsung pressing forward with a new deal. "Spreads have moved out in the asset class and the swap market is not favourable as it was for most of 2002," says one head of ex-Japan Asia ABS. "In this climate, Samsung may opt to go the safer domestic route, and in fact they have sent out a domestic RFP in the last couple of weeks. It might be coincidence, but it's also been rumoured that the company's funding needs have dropped. If that's true, on a cost basis, doing a smaller domestic deal makes much more sense."

Samsung Card last tapped the international market in October via HSBC. Sources close to the three-and-a-half year $400 million conduit deal - said that the all-in cost for the transaction was 55bp over Libor.

That raised some eyebrows given that it featured a monoline wrap from XL Capital Assurance to ensure triple-A ratings from Moody's and S&P. Third party guarantees for other Korean US dollar securitizations have typically added around 30bp-35bp to the all-in cost. On that basis, it is claimed Samsung's last deal was around 25bp-30bp cheaper than that achieved by Woori Card and KEB Card on their 144A issues and 25.5bp inside what Kookmin achieved with its $500 million unwrapped conduit transaction via ING last October.

Samsung's first cross-border deal via ING in September 2001 was issued with a wrap from MBIA Insurance Corp., enabling it to get triple-A ratings from Moody's and S&P. The $500 million issue, which had a 4.5-year average life, was placed privately with pricing believed to be just north of 50bp over Libor.

The issuer's second international deal closed at the end of July 2002 and was led by Banc One. The three-year deal was not wrapped and was priced at par with a coupon of 5.83%.

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