A smaller than expected $200 million perpetual non-call 10 issue for Hana Bank was priced yesterday (Tuesday) by lead managers JPMorgan and Barclays Capital. Pricing came at the outer end of the deal's indicative range, but the premium to Korean upper tier 2 debt was tight relative to the levels paid by much higher rated European comparables for tier 1 over tier 2 debt.
Priced at par, the deal has a coupon of 8.748% and a Treasury spread of 450bp or 405bp in Libor terms. The main pricing benchmark was Hanvit Bank's March 2005 upper tier 2 transaction and this was trading at 305bp over Treasuries or 285bp over Libor. Hana consequently paid a roughly 150bp premium to secure tier 1 capital, the same differential that many double-A rated European banks are currently trading at.
Because the deal was Reg S there was no placement to the US and the book broke down Korea 17%, Europe 25% and the rest of Asia 62%, with Singapore accounting for about 36% and Hong Kong 26%. A total of 46 investors were said to have participated of which two placed $20 million orders and the rest were sub $10 million
By investor type, asset managers took 37%, banks 31%, private banks 20% and insurance companies 12%. Most of the insurance companies were said to have been Korean, while the asset managers were predominantly European. Bankers estimate that about half the book was new to the product and a significant portion of the European investor base were buying Korea for the first time.
Because of the deal's high yield component, specialists say it appealed to a different investor base than the recent rash of senior deals by Korean banks and did not face similar problems with pricing indigestion. Where it did require work, however, was educating the investor base about the product and bank capital experts say that future tier 1 deals from Korea should be able to build on its success.
As one puts it," Some of the Korean accounts took a while to get their lines in place and the ones that did are very much the first wave of investors. A second wave should start participating in the deals expected next year as the product lays deeper roots."
Where the issue size was concerned, the bank had initially said that it would raise up to $300 million, but is said to be unconcerned that it did not hit the target as it regards hybrids as an expensive form of capital and has plans to raise common equity next year.
Proceeds are being used to top up capital that has been depleted by the bank's buy-back of minority shares. Under the terms of the bank's merger with Seoulbank, Hana's minority shareholders had the right to sell shares back to the bank if they opposed the agreement. Pre merger Hana had a freefloat of 43.2% and 16% of shareholders are said to have exercised their right to be bought out at Won17,252 per share.