Initially marketed to investors at 42bp over mid swaps, and subsequently tightened to 40-42bp over, the Reg-S 144a deal priced at the wider end of guidance. The transaction was priced at 98.364% on a coupon of 5.5% to yield 5.717%. This equated to 97.5bp over Treasuries or 42bp over mid-swaps. On an asset swap basis, the deal came at 39.5bp over Libor.
Fees were undisclosed.
Market instability that had pushed spreads out over the last week or so is said to have had little impact on the order book, which closed at the $450 million level with participation by 35 accounts.
By geography, the order book had a split of 65% Asia, 25% US and 10% Europe. In terms of investor type, banks took 40%, funds 30% and insurance companies 30%. Like most smaller-sized deals, the order book is relatively constrained and is made-up of accounts that are more inclined to buy and hold the asset.
The main comparable was the genco's outstanding 2011 4.95% bond. This deal was trading at 88bp over Treasuries or 37bp over Libor, meaning that KomipoÆs new deal offers a new issue premium of about 2bp on an asset swap basis.
Other benchmarks for the deal were trading in similar ranges. Korea East-West Power CorporationÆs (Kewespo) 4.875% 2011, is trading at exactly the same levels as the Komipo 2011, while its 5.25% 2012 is trading at 9over Treasuries, or Libor plus 41bp.
Korea Electric Power CorporationÆs (Kepco) 7.75% 2013 deal is also trading at 88bp over Treasuries or 37bp over Libor.
In addition, pricing offers a healthy pick up to Korean policy bank paper. The new deal establishes a five-year / 10-year credit curve for Komipo. Although in terms of its peers it does not have an adequate curve comparable, it is tight when weighed against the Korean policy banks which have very liquid curve differentials. Currently Korea Development BankÆs five to 10-year curve sits at around 8bp, while fellow quasi-sovereign Korea Import Export BankÆs is estimated at around 7bp.
Komipo is one of six energy generation entities spun off from Kepco in 2001. It has the strongest fundamentals of the non-nuclear spin-offs, but is looking to substantially increase its capital investment this year to W637.9 billion ($650 million) from W322.5 billion ($330 million) in 2005. However, this is not expected to significantly affect KomipoÆs underlying financial strength.
In its most recent ratings report, MoodyÆs said, ôDespite increasing debt levels, the companyÆs debt-to-capital ratio is expected to remain strong at 20% to 25% and debt to EBITDA at 1-times to 1.5-times over the next couple of years. Despite the margin pressures faced by the company, Komipo should be able to continue recording stable cash flows, backed by sustained growth in electricity demand and the companyÆs ability to sell 100% of its supply to its parent company Kepco.ö
