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Case Study: Hong Kong Card Master Trust. Asset-Backed Securities. Prof. Ian Giddy Stern School of Business New York University. Case Study: Hong Kong Card Master Trust. What is the relationship among the parties in this deal? (Draw a diagram) How are investors protected? And FSA? - PowerPoint PPT Presentation
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Case Study:Hong Kong Card Master Trust
Prof. Ian GiddyStern School of Business
New York University
Asset-Backed Securities
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 4
Case Study: Hong Kong Card Master Trust
What is the relationship among the parties in this deal? (Draw a diagram)
How are investors protected? And FSA?
How are the interest rate and currency risks managed?
Can you quantify the costs and benefits to Chase?
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 9
Hong KongCredit Card Obligors
Manhattan Card Co.Ltd.(Servicer)
Manhattan Card Funding Corp.(Seller/Cayman Island SPV)
Hong Kong Card Master Trust(US Based Issuer)
Investors
Chase Manhattan Bank N.A.(Swap Bank/Back-up Servicer)
Spread Account
Credit CardAgreement (HK$)
Receivables PurchaseAgreement (HK$)
Pooling & ServicingAgreement (HK$ Payments)
US$ Principal/Interest Payments
US$ Swap Payments
HK$
HK$ Swap Payments
Chase Manhattan Hong Kong: Summary
Excess Spread(HK$)
after losses
Chase100%
Bankers Trust
FSA
Trustee
FinancialGuaranty
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 10
Summary of Terms
Issuer Hong Kong Card MasterTrust
Amount US$200mmPaydown 4-7 yearsCalls 5% Clean-upRate Libor+0.25%Collateral $255mm HK credit card
receivables poolRating AAA/Aaa (FSA guarantee)
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 11
The Assets: Credit Card Receivables
What is the credit quality of the assets? Diversified: 281,352 accounts Charge-offs (0.74%-2.70%) Delinquencies (2.2%-4.0%) Balance/Limit ratio 47% Age: 43% over 3 years Fraud: partial insurance from Visa/MC 25% overcollateralization Servicing: high quality
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 12
PrincipalAmount
Clean-Up Call
End ofRevolvingPeriod
Date ofPurchase
RevolvingPeriod
AmortizationPeriod
Time
PrincipalRepayments AreReinvested
PrincipalRepaymentsAre PassedThrough To Investors
Paydown Structure
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 13
Paydown Structure
Clean-up call
Nov 1994
June 1999
(princ. Commencement)
Jan 2000
(exp. Final)
Nov 2001
(Final)
10
200
225Seller interest
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 14
Other Risks
Currency risk Interest rate risk Sovereign risk Legal risks Payment timing risks Swap counterparty risk Guarantor risk
Copyright ©2000 Ian H. Giddy Asian Applications of ABS 15
The Economics
Average revenue yield HK$ 25.25%Less charge-offs(2xaverage)
HK$ -1.50%
Less rate paid US$ -5.31%(Libor+0.25%)
Other costs (est.) -2.50%Net revenue (est.) +/-16.00%
