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Case Study: Hong Kong Card Master Trust

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?

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Case Study: Hong Kong Card Master Trust

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  1. Case Study:Hong Kong Card Master Trust Asset-Backed Securities Prof. Ian Giddy Stern School of Business New York University

  2. 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?

  3. Chase Manhattan Hong Kong: Summary Hong Kong Credit Card Obligors Credit Card Agreement (HK$) Chase Manhattan Card Co.Ltd. (Servicer) 100% Receivables Purchase Agreement (HK$) Excess Spread (HK$) after losses Manhattan Card Funding Corp. (Seller/Cayman Island SPV) HK$ Pooling & Servicing Agreement (HK$ Payments) Spread Account HK$ Swap Payments Trustee Hong Kong Card Master Trust (US Based Issuer) Chase Manhattan Bank N.A. (Swap Bank/Back-up Servicer) Bankers Trust US$ Swap Payments US$ Principal/Interest Payments FSA Investors Financial Guaranty

  4. Summary of Terms

  5. 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

  6. Paydown Structure

  7. Paydown Structure Seller interest 225 June 1999 (princ. Commencement) 200 Clean-up call 10 Jan 2000 (exp. Final) Nov 2001 (Final) Nov 1994

  8. Other Risks • Currency risk • Interest rate risk • Sovereign risk • Legal risks • Payment timing risks • Swap counterparty risk • Guarantor risk

  9. The Economics

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