Busan Bank sells first dollar bonds since 2012

The Korean lender's $250 million offering draws more than $2.3 billion of orders, highlighting ongoing search for yields.

Korean lender Busan Bank has issued its first US-denominated bond in more than four years, paying investors a decent new issue premium for its 10-year subordinated capital.

The Basel III-compliant Reg S deal comes after China's largest lender ICBC sold an alternative tier-1 bond last week, when it raised $1 billion in a perpetual non-call five structure. 

Busan Bank captured a peak order book of $2.3 billion, primarily driven by institutional funds and banks outside of the country, syndicate bankers familiar with the deal said.

"A lot of domestic banks and insurance companies are not allowed to buy the new print because of the relatively low credit rating but foreign funds and banks have stepped up the pace," one source familiar with the deal said. "As markets have recovered, no one wants to sit on cash."

Initial price guidance was set at Treasuries plus 240bp, before tightening the Singapore-listed bond to 210bp to 215bp area. Final pricing of the July 2026 $250 million deal was fixed at 99.585% on a coupon of 3.625% to yield 3.675%, or Treasuries plus 210bp, according to a term sheet seen by FinanceAsia.

The closest comparable was Shinhan Bank's Baa1/BBB+-rated 3.875% March 2026 bond, which was trading on a B-spread of 190bp. That said, Busan paid a decent new issue premium of 20bp.

Other relevant comparables include KEB Hana Bank's existing September 2024 4.375% and October 2024 4.25% notes, which were both trading on a B-spread of 187bp. The two bonds are rated Baa2/BBB by credit rating agencies Moody's and Standard & Poor's.

According to a sales note by a rival broker, the fair value of the new Busan Bank tier-2 capital should be traded at around Treasuries plus 215bp because it is one notch below Shinhan Bank's 2026 bond and a slight extension on the new print.

According to data provider Dealogic, the lender issued $300 million of bonds in February 2012. Without taking the latest deal into account, lenders in Asia ex-Japan have raised $19.3 billion of tier-2 capital in 60 transactions so far this year, compared with $23.9 billion issued in 42 deals for 2015 in total.

Joint bookrunners of the latest transaction were Credit Agricole, HSBC and Standard Chartered.

¬ Haymarket Media Limited. All rights reserved.