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Case Study: Hong Kong Card Master Trust

Explore the structured finance deal of Hong Kong Card Master Trust involving Chase Manhattan Bank and investors. Learn about risk management strategies, investor protection measures, and the economic implications for Chase Manhattan.

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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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