Hana Bank bond

Hana Bank raises $500 million as bond markets wind down

Debt bankers start to wind down after a tough second half, although Republic of Indonesia marches ahead with its roadshows.

While it is late in the year — and what has felt like a long year, at that — the Asian dollar market evidently still has legs, as demonstrated by a $500 million senior bond from Hana Bank, which got away early Thursday morning.

The Korean lender’s five-and-a-half-year benchmark is the first issue from a Korean commercial bank since July. A host of Korean quasi-sovereigns and policy banks such as Export-Import Bank of Korea, Korea Finance Corp and KDB have tapped the market during the past few months, but issuance from commercial banks has been thin, with Shinhan Bank’s $300 million bond in July the last one.

Rather fortuitously, the timing of Hana Bank’s deal coincided with an upgrade from Standard & Poor’s. The rating agency lifted its rating on the bank from A- to A shortly before the deal was announced late Wednesday morning.

Hana Bank went out with an initial guidance in the area of Treasuries plus 370bp. This was aggressively tightened to Treasuries plus 345bp to 355bp, with the bonds eventually pricing at the tight end.

The deal gathered an order book of $4.4 billion from 259 accounts, which is robust considering how late in the year the deal is coming, although the initial guidance was attractive. As with its previous deal, Asian investors took the biggest chunk. By geography, Asian accounts were allocated 67%, European accounts 15% and US accounts 18%. Funds were allocated 62%, banks 14%, insurers 9%, central banks 7%, private banks 4% and pensions and others 4%.

The bonds held up in secondary trade on Thursday morning and were quoted at Treasuries plus 344bp, slightly inside the reoffer despite softer markets. The coupon was fixed at 4.25% and the notes were reoffered at 99.458 to yield 4.362%. The bonds mature on June 14, 2017.

The outstanding Hana Bank November 2016s were trading at about Treasuries 310bp and, taking into account the tenor extension, this put fair value of a new Hana Bank bond maturing June 2017 at about Treasuries plus 327bp, which meant that Hana Bank paid a new issue premium of roughly 20bp, according to one person familiar with the deal. This was slightly less than the 25bp new issue premium paid by Wells Fargo in its $1.5 billion bond sold earlier this week.

Barclays Capital, Bank of America Merrill Lynch, Citi and HSBC were joint bookrunners.

Hana Bank last tapped the dollar market in late April with a $500 million five-and-a-half-year bond arranged by Barclays Capital, Citi, HSBC and Standard Chartered. Those bonds pay a coupon of 4% and priced at a spread of Treasuries plus 205bp, so in spread terms, Hana Bank is paying 140bp more for its latest deal.

Hana Bank is South Korea’s fifth-biggest bank with a 9.4% share of deposits as of June 2011. Its core tier-1 capital ratio was 9.74% as of June 2011, slightly lower than the industry average of more than 10%, according to Moody’s. Hana Bank is rated A1 by Moody’s and A- by Fitch.

For the most part, bankers expect debt markets to wind down from here onwards, which should come as a relief after a rocky and tough second half that has been dominated by layoffs rather than deal flow.

However, one potential deal is Republic of Indonesia, which has kicked off fixed income investor meetings this week. HSBC, J.P. Morgan and Standard Chartered Bank are the arrangers. The meetings were held in London on Wednesday, Edinburgh on Thursday, New York on Friday and Hong Kong this coming Monday and Tuesday.

¬ Haymarket Media Limited. All rights reserved.