Late Thursday (September 7) the leads priced the $400 million Reg-S deal at the tight end of revised price guidance.Having set out on roadshows on September 4 with an indicative range of 75bp to 80bp over mid swaps, guidance was tightened to 72bp to 73bp over.
Final pricing for the Baa1/BBB+ deal came at 99.68%, on a coupon of 5.875% offering a yield of 5.95%, equivalent to 72bp over mid-swaps, 69.5bp over US dollar Libor or 119.3bp over US Treasuries. The notes step up to 219.3bp over Treasuries if not called.
The notes are being issued off of HanaÆs $2.5 billion global medium term note programme. The order book closed just shy of $2 billion, an oversubscription ratio of 2.5-times, with 130 investors taking part.
In terms of geography, Korean investors accounted for approximately 20% of the offering, 49% originated from other Asian investors and 31% from European investors. By investor type, banks accounted for 54% of the offering, funds 34%, government agencies and municipalities 8%, and others 4%.
The deal marks HanaÆs debut in the lower-tier 2 market and is the first time the bank has accessed the international markets with a benchmark transaction since March 2004.
The deal was able to tap into the ample liquidity that has returned to a market restrained by investors reluctant to put their money to work because of the volatility over recent months.
Hana Bank was the first to issue a hybrid tier-1 deal from Korea when it launched an 8.748% perpetual non-call 10-year in 2002 via Barclays and JPMorgan. That deal, rated BBB-/BBB-, is trading at a bid/offer 112.20% to 112.77%, yielding 6.24% to 6.14%. This is equivalent to 137bp to 127bp over US Treasuries or 89bp to 78bp over swaps
As a very active market, the Korean bank sub-debt space provides a range of comparables.
Industrial Bank of Korea (IBK) has a 5.75% 2015 callable in 2010. That deal was trading at a bid to offer spread of 114bp to 104bp over US Treasuries or 63bp to 53bp over mid-swaps.
Woori Bank priced a benchmark $1 billion 10-year non-call five-year lower-tier 2 deal in April. That deal, KoreaÆs second largest corporate bond ever, was quoted at 124bp to 116bp over Treasuries or 76bp to 69bp over swaps.
Lastly, National Agricultural Cooperative Federation (NACF) priced a 6.125% 10-year non-call five-year in June. That is now trading at 121bp to 111bp over Treasuries or 70bp to 61bp over swaps.
Heading into the deal bankers had expected a new Hana LT2 deal to price in line with NACF. Because of IBKÆs earlier maturity and quasi-sovereign status, Hana had been expected to price wider, while it was expected to price inside of Woori BankÆs deal.
Therefore, the new deal prices in line with the marketÆs anticipated fair market value.
As of June 30, Hana had total assets of W118 trillion ($122 billion), an increase of almost 20% over the W99.6 trillion ($101 billion) at the same period in 2005. However, due to tax expenditures, net income fell from W261.4 billion ($271 million) in the first quarter to W251 billion ($260 million) in the second quarter.
Hana has an NPL ratio of 2.61%, significantly lower than the 3.8% national average for domestic banks. Its tier-1 ratio improved to 9.3% at the end of last year from 7.58% in 2004, putting it above the 8.75% average of the other rated banks in Korea.
Founded as Korea Investment and Finance Corp in 1971, Hana has grown into a major bank through a series of tactical acquisitions. Last year Hana purchased Daehan Investment & Securities giving it a 10% share of KoreaÆs asset management market.
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