December 18, 2003 FinanceAsia
KAL Japan ABS 1 Yen 27 billion
Arranger: Nomura
Originator: Korean Air Lines
If imitation is indeed the most sincere form of flattery then Nomura"s Yen 7 billion securitization for Korean Air Lines (KAL), followed almost immediately with an imitative deal from Asiana, deserves praise.
This securitization of KAL"s yen receiveables from its Korea-Japan routes was fiendishly complicated, multi-jurisdictional and notched up a number of firsts, as well as setting a world record as the largest ever airline ticket receiveable deal.
It was Japan"s first future flow securitization of airline ticket receiveables, the first airline deal to securitize International Air Transport Association (Iata) receiveables rather than credit card payments and KAL is the first non-Japanese Asian originator to tap yen investors.
Even in a busier year KAL would have stood out as an extraordinary deal. Despite a KDB guarantee the deal"s underlying structure is solid and provided funding to an originator struggling amid growing fears of terrorism, a tourist slump prompted by Sars and simmering tension between North and South Korea.
KAL still had to go to the ends of the earth to get the deal done. Being a truly cross-border deal the advisers had to make certain aspects of the deal work in numerous jurisdictions, including both South Korea and Japan. By using Iata receiveables it was necessary to ensure a true sale in Canada, where the association is based. And the double SPV structure took those receivables off to Ireland and the Cayman Islands. All in, lawyers from seven different firms had a hand in the deal.
* Lee & Ko represented Korean Air Lines (KAL) as originator.