Calyon, HSBC, Merrill Lynch and Morgan Stanley managed Korea Exchange BankÆs A2/BBB+ $300 million five-year Reg-S FRN bond offering, which priced at the tight end of guidance at 33bp over three-month Libor. Guidance was released on Friday at 34bp over Libor, plus or minus 1bp, as markets stabilised in the US.
KEBÆs bonds have traded 1bp tighter on the secondary market.
The deal was 2.5 times subscribed and attracted approximately $750 million worth of demand. ôItÆs a good outcome considering the levels at which we have seen the market trading," says one source close to the deal. "We succeeded in balancing the size of the issue and final pricing with the expectations of the issuer.ö
The deal, in which 50 investors participated, saw 65% of its bonds sell to Asia, and 35% to Europe. In terms of investor-type split, 84% of the bonds were allocated to banks, 11% to funds and 5% to other.
In terms of comparables, bankers quoted Suhyup BankÆs July 2012s (A3/A-) which were trading at 30bp over Libor and KookminÆs April 2012s (A1/A) which were trading at 25bp over Libor. Additionally, NACFÆs January 2012s (A2/A) and WooriÆs November 2011s (A1/A-) were also relevant. These were trading at 26bp and 25bp over Libor respectively.
Meanwhile, KoreaÆs top mobile company SK Telecom issued a 20-year $400 million deal via Credit Suisse, Merrill Lynch and Morgan Stanley, attracting an order book of $800 million. As many as 40 accounts participated in the deal which priced at the tight end of guidance at 155bp over 30-year Treasuries.
SK Telecom's bonds tightened by a full 10bp to 145bp in secondary trading, suggesting a new issue premium that other companies such as MISC and Kia Motors were not prepared to pay. Says a Hong-Kong-based syndicate banker: ôItÆs pretty clear that the issuer paid a pretty big new issue premium, but itÆs good for the market to have paper trading up in this way. This deal shows that there is still liquidity in the market, but at a price.ö
But sources both on the sell-side and the buy-side say the tightening occured because the bonds were placed with high-quality investors. Showing flexibility in both pricing and tenor, SK Telecom was quick to respond to high demand from US for long-dated Asian paper by adjusting the tenor of the bond to 20 years. Accordingly, many bonds sold to US insurance companies, ensuring allocation primarily to high-quality buy-and-hold investors.
ôThe paper was clearly well allocated, since I havenÆt seen any loose bonds around. ItÆs healthy for the market that these two issues have traded up so well,ö says a Singapore-based traded.
Geographic split saw 82% of SK Telecom's bonds sell to the US, 5% to Europe and 13% to Asia ex-Japan. In terms of investment-type, 46% of the bonds sold to insurance companies, 50% to funds, 1% to banks and 3% to other.
In terms of comparable, bankers quoted SK TelecomÆs April 2011s, which were trading at 35bp over Libor at the time of pricing, and KT Corporation's May 2016s (A3/A-) which were trading at 46bp over Libor. AT&TÆs June 2016s and May 2036s were trading at 37bp and 36bp over Libor.
ôSeveral issuers recently postponed their deals due to challenging market condition. But these two issuers were prepared to go to market and reasonably price their deal. This has hopefully created some stability and opened a window for investment grade issues,ö says a source close to the deal.
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