A $300 million five-year Reg S offering was priced yesterday (Tuesday) by lead managers ABN AMRO and HSBC.
Coming right behind a huge raft of policy bank paper, timing has been unfortunate and observers say Kookmin did consider whether it might be wiser to postpone the issue. However, conscious that investors will be distracted by Christmas and a similarly large wave of Korean tier 1 capital deals - including a prospective $1 billion issue from Kookmin itself - the decision was taken to proceed and price at a market clearing level.
Terms were set at 99.868% on a coupon of 4.625% to yield 4.655% or 138bp over Treasuries. At this level the deal came 3bp back of IBK, whose recent five-year deal was trading at 135bp bid, 15bp back of Kexim trading at 123bp over and 18bp back of the KDB trading at 120bp over.
Observers emphasize that Kookmin's main strategic aim was to make sure its first deal was well received, well supported and considered fair value by investors. It, therefore, decided to leave a couple of basis points on the table and maintain the original issue size rather than cut it back slightly in order to tighten the spread.
The deal did not hit the bank's pricing original pricing ambitions to come flat to Kexim and its experience shows that the pricing indigestion which hit the loan market in October has now migrated to the bond market as well. But the deal did price at the tight end of final indicative terms and like its predecessors has taken advantage of low Treasury yields.
As one banker comments, "If IBK hadn't accessed the market last week, it might have been possible to squeeze pricing. But the short period of time between the two deals and IBK's poor secondary market performance made this completely impossible."
Kookmin is rated one notch lower than both Kexim and KDB on Standard & Poor's side and in line with A3/BBB+ rated IBK, although it is on stable outlook compared to IBK's positive outlook. In time, bankers are hopeful that it will trade through IBK, which priced last week at 130bp over Treasuries, but immediately widened out 5bp in secondary market trading and has stayed there ever since.
Bankers report that books closed at the $450 million level, with participation from 36 accounts of which 30 came from Asia and six from Europe to give an 83%/17% geographical split. From Europe, orders came from the UK, Ireland, Switzerland and Germany, while Asia saw heaviest participation from Japan and China followed by Hong Kong, Singapore, Malaysia and Korea, which absorbed about $25 million in paper.
By investor type, the book broke down 70% banks, 20% asset managers and 10% insurance companies and private banks.
"As Kookmin had hoped, the order book was very strong," one banker concludes. "There wasn't a single switch and investors received a roughly 75% fill."
