Korea Gas, the world’s largest buyer of LNG, has sold the first euro bond from a South Korean corporate since June as Asian companies line up to take advantage of the lower borrowing costs on offer.
Kogas priced a €500 million 5.5-year bond with a coupon of 2.375% during European business hours on Tuesday, seeking to tap a cheap market hungry for good quality Asian credits.
The note priced at 103bp, which is 17bp tighter than an initial price guidance of euro mid swaps rate plus 120bp, according to a source.
Kogas’ bond comes hot on the heels of similar issues by Chinese state-owned enterprises (SOEs), suggesting firms in Asia are being drawn increasingly to the euro-denominated bond market as a result of lower borrowing costs and rising demand from European investors.
“From a pricing perspective it is very competitive funding versus dollars,” the source in London said. “It performs a very neat function in taking pressure off some of its dollar curve and as a way to diversify its funding portfolio.”
“We are also seeing greater demand from European investors for prime Asian assets,” he said. “That is the legacy of [the] globalisation of markets post-financial crisis where investors are looking beyond their own domestic borders and looking for investment opportunities on a global basis.”
Having mandated several banks to arrange fixed income meetings in Europe and conference calls with Asian and US-based fixed income investors, starting on October 4, China’s biggest refiner Sinopec could yet follow Kogas with a senior unsecured US dollar and/or euro bond offering.
The yield on the benchmark 10-year US Treasury note was at 2.64% today compared with just 1.82% on a German bund of the same maturity. Corporate bond yields are usually closely correlated to yield movements on government bonds.
Fitch Ratings has assigned Kogas' proposed euro bond an expected senior unsecured rating of AA-. The paper will be issued under the company’s global medium term note programme, which has a similar rating.
Barclays, BNP Paribas, Crédit Agricole, Deutsche Bank, Goldman Sachs and UBS are the joint bookrunners of the Kogas deal.
Citi, HSBC, JPMorgan, Société Générale and Goldman Sachs are joint global coordinators, lead managers and bookrunners on the Sinopec deal, which is subject to market conditions.
