23 October 2003

Freshfields Bruckhaus Deringer completes unique Korean securitisation in a difficult market

The Hong Kong office of international law firm Freshfields Bruckhaus Deringer has recently acted for BNP Paribas in arranging a Korean cross-border securitisation of credit card receivables originated by Shinhan Card.  

Unusually, the transaction was funded by the issuance of a €300m bond, the first time such euro-denominated securities have been issued to finance a cross-border Korean asset backed security (ABS) transaction (US dollar issuance has been the norm). In addition, a Korean trust and a Korean ABS Act special purpose vehicle (SPV) were used in the transaction and the usual offshore, typically Cayman Islands, SPV was dispensed with.

Patrick Lines, who led the team of lawyers on this transaction, explains, “The use of an offshore SPV was not considered necessary in this transaction since the main reason for having one is to facilitate the transfer of security granted by the Korean SPV. Such a transfer is unlikely to happen here. This makes the documentation much simpler and therefore reduces the transaction costs for the client and allows for quicker execution”.

As there is not yet a developed Korean won-euro swap market, the swap provider needed to conduct two back-to-back transactions (Korean won-US dollar and US dollar-euro) in order to perform its obligations under the swap agreement to swap Korean won into euro.

The bond is rated AA- by S&P and Fitch, and Aa3 by Moody’s, and is not guaranteed by a monoline insurer, another unusual feature in the Korean cross-border ABS market.

Lines added, “As the Korean ABS market becomes relatively more sophisticated we may see more unwrapped transactions coming out of Korea”.

The completion of this transaction is significant since the international Korean ABS market has been relatively quiet since the end of 2002 as a result of the rising credit card default rates.

Freshfields Bruckhaus Deringer acted for BNP Paribas as arranger and swap provider and JPMorgan Chase Bank in its capacities as the security agent and transaction administrator.

The Freshfields Bruckhaus Deringers team members were Patrick Lines, partner and associates Elton Cheung and Winefred Kwan. Clive Rough, partner and associate Maria Chang acted for JPMorgan Chase.


Notes for editors

Freshfields Bruckhaus Deringer is a leading international law firm providing a comprehensive worldwide service to national and multinational corporations, financial institutions and governments.

Freshfields Bruckhaus Deringer is widely regarded as having one of the leading securitisation practices in the region. In Asia, the firm has handled securitisation transactions since the market’s inception in the early 1990’s. Since then, members of the Asian securitisation group have worked on a significant proportion of the largest and most complex Asian securitisation transactions (including those with a large multi-jurisdictional element) that have completed in Asia.

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