Korea Exchange Bank last week awarded the mandate for a $150 million two-year loan to Credit Lyonnais, Natexis Banque Populaires, Standard Chartered and Sumitomo Mitsui Banking Corporation. Along with LB Kiel, joining as coordinating arranger, the banks launched the deal into general syndication late last week on August 29. The deadline for closing of the deal is September 18.
The two-year deal pays a margin of 20bp over Libor. Banks participating in the transaction as co-arrangers with commitments of $10 million or above are offered all-in of 40bp. On the lower levels, lead managers and senior managers receive all-in of 39bp and 38bp for commitments of $5-$9 million and $2-$4 million respectively.
According to figures provided by Dealogic, KEB earlier this year tapped the loan markets in May when it raised $110 million through a one-year term loan at a margin of 18bp over Libor. The last two-year deal by KEB was in December 2000 when it raised $20 million as part of a $100 million three-tranche deal. KEB paid a margin of 85bp over Libor for that tranche. Proceeds from the current deal would likely go toward repaying the $20 million tranche maturing in December and a $130 million one-year loan tapped in September 2001 at a spread of 32bp over Libor.
The pricing for KEB's deal is similar to that of similar-rated Cho Hung's $250 million two-year deal closed last month. Cho Hung's deal also paid a spread of over 20bp over Libor, but was marketed only on one level to arrangers committing a minimum of $20 million. According to sources, the deal was up to 15% over-subscribed with some of the coordinating arrangers even scaling down their final takes.
With KEB's deal, success is virtually assured given that the size is smaller than Cho Hung's transaction and there are already five banks in the deal. KEB is only 43% owned by the Korean government (the government owns up to 80% of Cho Hung through KDIC) with another 33% owned by Commerzbank. Although seen as a weaker credit than Cho Hung, KEB has attempted to improve its asset quality and profitability and that was demonstrated last week when Fitch raised the outlook on KEB's BBB- rating from stable to positive.
But its exposure to debt-laden chipmaker Hynix Semiconductor is still a cause for concern. In June KEB and other lenders became the largest shareholders in Hynix, the world's third largest chipmaker, when they swapped over KRW3trillion of debt into equity. Nearly half of the chipmaker's KRW6.3 trillion in debts as of June 2002, fall due for repayment in 2004. KEB and other creditors hired Deutsche Bank to make recommendations to sell Hynix following the breakdown of negotiations in May with Micron Technology of US.
KEB's profits at KRW20.9 billion in the second quarter of 2002 were 45% higher over the same period last year. In 2001 KEB posted net profits for the first time in five years.
