ING provides swap for first Korean cross-border RMBS

Dutch bancassurer ING is to provide a 21-year swap for South Korea’s first cross-border residential mortgage-backed security (RMBS). “This is the first 21-year cross-border swap done in the Korean market,” said Marc Choo, a Hong Kong-based director in the structured products group of ING Financial Markets.

The swap is part of a $299.6 million RMBS issued by Samsung Life, which was priced on Wednesday in London at 50 basis points over the three-month London interbank offered rate. The transaction is referenced on a portfolio of Korean won-denominated residential mortgages and achieved Aaa and AAA ratings from rating agencies Moody’s Investors Service and Standard & Poor’s, respectively, due to an unconditional and irrevocable guarantee from monoline insurer Ambac.

“The swap pays a changing proportion of Korean won fixed and floating rate on one side and US dollar floating rate on the other,” said Choo.

The notes issued by special purpose vehicle Bichumi Global I as part of the RMBS mature in December 2022, and the transaction is expected to close on December 10. Morgan Stanley was lead manager and bookrunner for the deal, with Lehman Brothers, Nomura International and Samsung Securities acting as co-managers. ING Bank was a junior co-manager.

ING has acted as the swap provider on several cross-border deals out of Korea this year. "We continue to believe that the Korean market, which has led the Asian asset-backed securitisation market outside Japan, will continue to grow and even pick up pace next year," Choo said. "ING hopes to continue to play a major role as swap provider.”

Choo said liquidity in the Korean swaps market during the past year has led to an increase in activity in long-dated transactions such as securitisation swaps. "The curve out to five years is pretty much established now,” he said.

“The impact of securitisation swaps can move the market slightly on an intra-day basis, but does not affect the market over the mid-term as there are both asset swappers and liability managers doing trades on both sides,” Choo added.

Choo said he exepcted the market to continue to develop in terms of size and maturity, with additions of optionality over the next year or so in the interest rate arena.

At the end of October, ING provided a cross-currency swap for Samsung Card’s $400 million cross-border asset-backed security referenced on credit card receivables.