When Kookmin Bank’s $1 billion five-year covered bond came to market in May 2009, it was feted as the deal of the year. Oversubscribed by six times, it was hailed as the transaction that would finally open the covered bond market in Asia, after two high-profile attempts from Japan’s Shinsei Bank in 2008 failed to emerge.
But so far no other Korean or Asian financial institution has followed Kookmin’s example. That is set to change in 2010. “We’ve been getting more enquires from people interested in structuring covered bonds in Korea,” says Hooman Sabeti-Rahmati of Allen & Overy. “An issuance in 2010, which looks possible, could open the market if it achieves the right economics with a straightforward structure.”
However, for these hopes to come to fruition, banks, regulators and lawyers need to learn the lessons of Kookmin –...