GS Caltex may upsize bond

Joint bookrunners Bank of America, Barclays and Merrill Lynch to price $300 million GS Caltex bond later today.

The Korean oil refiner, started roadshows on Oct 13, shopping the Reg-S 144A deal to investors at roadshows in London, New York, Singapore and Boston. Although initially launched at a size of $300 million, the book is said to have already topped that mark and observers speculate that the deal could be upsized. The borrower is looking to raise $500 million in the debt markets in order to pay down debts.

The bookrunners opened the bookbuilding process marketing the notes at an indicative range of 110bp to 115bp over 10-year US Treasuries or 62bp to 67bp over Libor.

With the 2014 to 2015 curve estimated to be worth approximately 7bp, the new deals guidance is in line with existing Caltex offerings. Caltexs 5.5% July 2014 is currently quoted at 104bp over Treasuries or 56bp over Libor. Caltex also has a 7.75% July 2011, which is currently trading at 94bp over Treasuries or 46bp over Libor.

The deal will likely garner a lot of interest because it offers investors diversification away from the wash of Korean quasi-sovereign credits and banks that routinely tap the market. Additionally, the credit is seen as a leveraged play on Chevron Texaco, who own 50% of GS Caltex. GS Holdings and Chevron Texaco subsidiary Caltex Corp own the refiner in equal parts.

S&P and Moodys rate GS Caltex BBB+ and Baa1 respectively. In June, S&P raised its debt rating from BBB citing the strong performance of Caltexs petrochemical division and its debt reduction program.

Korea's second largest oil refiner after SK Corp, GS Caltex operates the world's largest benzene producing plant, used in the production of unleaded gas. GS Caltex has a crude oil refining capacity of 650,000 barrels of oil per day. The company also operates 3,000 gas stations.

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