First ABCP issuance backed by auto installment receivables

42-month maturity structure with credit support from three banks

Auto finance assets up 16.1% in first half to 1.36 trillion won

[Lotte Card]
[Lotte Card]

Lotte Card has securitized its auto installment loan receivables for the first time, raising 167 billion won ($125 million). The move diversifies the card issuer's funding channels amid continued growth in its auto finance asset base.

Lotte Card said Tuesday it issued 167 billion won in domestic asset-backed commercial paper, or ABCP, using auto installment loan receivables as the underlying assets — the first time the company has tapped securitization through such receivables.

The transaction comes as Lotte Card's auto installment finance assets have been expanding. The portfolio stood at 1.36 trillion won in the first half of this year, up 16.1 percent from 1.17 trillion won in the same period last year. Lotte Card operates its auto finance business primarily through products such as Lotte Card Direct Auto, which combines credit card payments with installment financing.

The private-placement ABCP deal carries a total maturity of 42 months and is structured as a rollover facility, with the outstanding balance reduced through monthly refinancing until final repayment.

Lotte Card signed purchase guarantee and credit support agreements with NH NongHyup Bank, Industrial Bank of Korea and Woori Bank. On the strength of those arrangements, the securities received a short-term securitization credit rating of A1(sf) from both Korea Ratings and NICE Investors Service.

Lotte Card had already signaled its intention to diversify its funding structure when it released its first-half earnings in August. Financial costs on a consolidated basis came to 343.9 billion won in the first half of this year, down 8.0 percent from 373.9 billion won a year earlier, while net profit for the period rose 55.5 percent to 64.7 billion won. At the time, the company said it would continue managing asset quality, diversifying its funding structure and improving cost efficiency to achieve a medium- to long-term recovery in profitability and strengthen its business fundamentals.

"Backed by the growth of our auto installment finance assets, we have successfully completed our first securitization funding using those receivables," a Lotte Card official said. "We will continue to diversify our funding channels to ensure stable liquidity."


snsd@heraldcorp.com