Hyundai Capital prices bond ahead of panic

Hyundai Capital slips its yen-denominated bond past investors just prior to the global equity rout on Friday. The deal is the first Samurai arranged by UBS.

Hyundai Capital Services, one of Korea's leading credit financial service companies, succeeded in pricing a ¥40 billion three-year Samurai bond on Thursday, ahead of another global equity sell-off on Friday.

The deal, rated A- by the Japanese credit rating agency JCR, came just prior to violent fluctuations in equity markets on Friday, which caused Japan's bourse to tumble sharply.

The sell-off followed news that BNP Paribas had frozen $2.2 billion worth of funds hit by the US subprime mortgage crisis. This triggered the European Central Bank to inject €94.8 billion into its money markets on Thursday, with the Fed following suit, pumping $38 billion into the system to maintain short-term lending rates.

The move prompted Bank of Japan to inject ¥1 trillion into its system, at the high end of expectations. The Reserve Bank of Australia in turn more than doubled its usual contribution as a result of increased market nervousness about banks worldwide.

Meanwhile, spreads of emerging market sovereign bonds over US Treasuries widened by 4bp to 208bp, after a 9bp move on Thursday, according to Reuters. This approached the 226bp reached last month, the widest level this year.

UBS acted as lead manager and joint bookrunner for the Hyundai Capital deal, alongside Nikko Citigroup Bank. The transaction marked the Swiss bank's first Samurai bond since the institution established its Japanese fixed-income platform in 2005. For Hyundai, this was the company’s fourth foray into the Japanese market.

The deal priced at 59bp over Libor, with a coupon of 1.97% and a subscription rate of 1.4 times. Initial guidance was released at 40bp to 50bp over Libor on Tuesday.

“We priced somewhat wide of guidance, but the market was very volatile, with overseas spreads jumping at least twenty basis points a day. This led us to release guidance on Tuesday ahead of pricing on Thursday – much later than is usual for issuances on the Japanese domestic market,” says a source.

Fees were 30 cents.

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