Barclays and Merrill Lynch were joint bookrunners of a Y35 billion ($205 million) euro-yen deal that priced yesterday (Tuesday). The three year deal, which has a Uridashi filing to better penetrate Japan's retail investor base, was priced at par with a 1.18% coupon to yield 93bp over yen-Libor.
At these levels, it has come 6bp tighter than the Baa3/BBB-rated group's similar three-year deal of April this year, which was trading at 99bp bid at the time of launch. Some bankers had been expecting the deal to price in the mid 80bp range, but others say that this was never very realistic and was finally squashed by overnight volatility in Argentina.
Unlike April's Y30 billion deal, the current offering has a much broader distribution pattern. Bonds were syndicated on retention basis and both Barclays and Merrill's report that only 25% went to Japan, with 65% placed in non-Japan Asia and the remaining 10% in Europe, where retail accounts in Italy and Switzerland predominated. By contrast, Japanese institutions swallowed up about 90% of April's deal.
"Since the first deal, there have been quite a few US corporate borrowers in the yen markets," one banker comments. "A lot of these auto-related deals are trading north of 100bp over yen-Libor. Greater choice has made investors a little bit more selective."
In total Barclays and Merrill's were allocated 80% of the bonds, with joint-lead Hyundai Securities taking 10% and and co-managers BNP, Daiwa SMBC, HSBC, Nikko Salomon Smith Barney and UBS Warburg, the remaining 10%.
The latest offering brings Kepco's tally of outstanding yen bonds to 19.
