Hana heading to market with new sub debt deal

Barclays, BNP Paribas and Deutsche ready to hit the road with Hana Bank for a new lower-tier 2 bond.
KoreaÆs Hana Bank has mandated Barclays, BNP Paribas, and Deutsche Bank for a dollar-denominated 10 non-call five-year lower-tier 2 subordinated bond deal. The notes are being issued off of HanaÆs $2.5billion global medium term note programme.

Although final size has not yet been determined, the deal is expected to be in the $300 million to $400 million range.

Roadshows are scheduled to begin on Monday (September 4) in Singapore, before heading to Hong Kong on the Tuesday and London on the Wednesday. The deal is Reg-S only.

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

The notes have been assigned a Baa1 rating from MoodyÆs, and a BBB+ rating from S&P. Hana has a senior foreign currency rating of Baa1/A3. Hana was one of the eleven banks to benefit from an industry upgrade from MoodyÆs in early August.

Korean bank sub-debt is a very active market and provides a wide array 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 126bp to 118bp 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.

As it is a year shorter in its maturity, a new Hana deal is expected price slightly wider than IBK. Conversely, Hana is expected to price inside of Woori Bank as its deal will be markedly smaller.

Therefore, bankers are expecting the new Hana deal to price in line with the existing NACF trade.

Hana is the fourth largest commercial bank in Korea in terms of assets, behind Kookmin, Shinhan Financial and Woori.

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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