Kookmin has hired Citi and HSBC to lead the roadshow in Europe and US, according to a banker not involved in the deal. It is discussing a deal worth at least $500m, but could raise as much as $1bn, said another banker.
Kookmin is set to become the first covered bond issuer from the Asia-Pacific region, but the deal is likely to introduce a new twist to the traditional covered bond structure, EuroWeek has learned.
The final structure of Kookmins issue has not been publicly disclosed, but bankers said that credit card receivables may form part of the cover pool. This would add a new class of collateral to the portfolios of mortgages that are typical in the European market, raising some bankers to question whether or not the deal should be considered a covered bond at all.
"It is not an asset that is used in covered bonds," said an ABS head in Hong Kong. "Its against the well-defined world of the European investor base. But the important thing is whether it means that it can get good pricing."
However, a possible broadening of the range of assets used as collateral in covered bond-type structures has been floated ever since the funding instrument began to attract the interest of issuers outside established markets. Institutions in the US and elsewhere are said to have looked at the possibility of using credit card receivables as collateral, while student loans, auto loans and other exposures have also been mentioned.
Other Korean borrowers, such as Woori Bank and SC First Bank, are waiting for Kookmin to open the market before they attempt their own deals.
The addition of Citi takes the top line of banks back up to two, after Kookmin dropped Barclays Capital and ING from the deal in February for HSBC, unhappy at the time it was taking to sell a deal.
A number of different issuers across Asia including banks in Japan, Taiwan and New Zealand became interested in selling a covered bond last year, but most backed away as funding costs went up in the European market. Few wanted to take the first step and those potential issuers have been whittled down to one. Bankers now say that the hopes for the Asian covered bond market rest on Kookmins shoulders.Bankers at Citi, HSBC and Kookmin Bank either declined to comment or could not be reached.