GS Caltex is selling a $400 million five-year bond, following in the footsteps of other Korean borrowers that have come to market since the sovereign reopened funding doors last week, pushing the country’s dollar issuance to a record high.
The South Korean oil refiner’s 144A and Reg S-registered note has an initial price guidance of Treasuries plus 160bp, and will likely be priced during New York hours on Wednesday, according to a source close to the deal.
GS Caltex will add another $400 million to South Korea’s record-breaking DCM dollar-denominated volume, which has more than doubled to $15.9 billion year-to-date from the $6.2 billion raised during the same period last year, according to Dealogic data.
“We have had a pretty decent year of Korean issuance because they have had a strong need to refinance as they issued quite a lot back in 2009,” a Hong Kong-based syndicate banker told FinanceAsia. “Quite a large chunk of it was due in February, March this year, hence the heavy issuance but I expect this trend to continue.”
Strong pipeline
Other Korean borrowers have plans to tap the dollar market in the coming weeks, including Kookmin Bank and Korea Gas.
Kookmin Bank on Tuesday has mandated Barclays, BNP Paribas, Bank of America Merrill Lynch, Citi and Standard Chartered to arrange a series of fixed-income meetings in Asia, Europe and the US, commencing the week of June 16. A dollar transaction may follow subject to market conditions.
Meanwhile, Korea Gas on Monday has hired BNP Paribas, Citi, HSBC, JPMorgan and UBS for a potential dollar bond sale. Investor meetings will begin in the US during the week of June 16, according to sources familiar with the matter.
According to Dealogic data, Korean borrowers still need to refinance approximately $8.4 billion worth of dollar-denominated bonds this year and $17.2 billion in 2015.
Last week
On June 4, the Republic of Korea raised a $2 billion dual-tranche multicurrency bond, the first of its kind since 2006, in an effort to establish a 30-year benchmark and to revive a market that has been shut for more than a month.
The transaction is the third largest sovereign, supranational and agency (SSA) note in South Korea, behind the Republic of Korea’s $3 billion bond in April 2009 and Export-Import Bank of Korea’s $2.3 billion offering in January 2012, according to Dealogic data.
Following in the sovereign’s footsteps closely was Korea Exchange Bank, which priced a $500 million five-year bond on June 5. The issuer was able to tighten guidance by 25bp and ended up pricing at Treasuries plus 100bp, or a yield of 2.5%, according to a term sheet seen by FinanceAsia.
The 144A/Reg S-registered transaction was more than four times oversubscribed from more than 140 accounts, which consisted of quality investors. Fund managers purchased 42% of the offering, followed by banks with 26%, sovereign and pension funds with 18%, insurers with 12% and private banks with 2%.
Before the Korean sovereign’s issuance, Korea Resources was the last local borrower to tap the dollar market, issuing a $340 million note on April 29.
Citi, Credit Agricole, HSBC, Mizuho Securities and KEB Asia Finance were the joint bookrunners and lead managers of KEB’s note.
