Hyundai Capital sells tightly-priced $600m bond

Despite uncertainty ahead of a key Trump speech and aggressive pricing, the five-year deal gets strong demand — and soon trades up in the secondary market.

Hyundai Capital Services, the financing unit of Korea’s largest auto maker, sold $600 million of five-year bonds early on Tuesday, ahead of US President Donald Trump’s congressional speech on economic policies.

The 144a/ Reg S deal was priced during New York hours after meeting strong demand from Asian, European and US investors. Before US investors starting to placing orders, the book had reached $1.4 billion as of 5.20pm Hong Kong time, according to bankers running the deal. That was similar to the $1.2 billion of orders the company garnered for a $500 million five-year bond last year.

The strong demand underlined the buoyant state of the Asian primary bond market, even at a time when US investors are staying cautious as they await clarity on Trump's policy in areas including trade, tax and infrastructure spending.

“The new deal was well executed and covered mostly by international investors,” a syndicate banker running the deal said. “There was a decent amount of US demand, even though some investors adopted a wait-and-see approach before President Trump’s speech to Congress.”

The strength of the Asian market was further underlined on Tuesday when China Development Bank, an Aa3/AA-rated policy lender, issued $2 billion of floating-rate notes, giving investors an alternative way to protect against rising interest rates.

Initial guidance for Hyundai’s March 2022 deal was pitched at 145bp over five-year US Treasuries, before it was tightened to 125bp over Treasuries.

In secondary trading on Tuesday, the bond was trading 5bp tighter than its reoffer at 120bp over Treasuries, according to a syndicate banker.

Bankers said the closest comparable was Hyundai Capital Services' outstanding $500 million March 2021 bonds, which were trading at 104bp over Treasuries before the deal was announced, or a G-spread of 123bp. That implies the borrower got away without paying any new-issue premium.

According to Dealogic, the company, rated Baa1/A-/BBB+ by Moody’s/S&P/Fitch, has two US dollar bonds maturing this year, including a $500 million floating rate note due on March 18 and another $500 million due on September 13.

The company said the proceeds from the bond sale would be used for general corporate purposes.

The bookrunners were Bank of America Merrill LynchCitigroupCrédit AgricoleHSBC and Societe Generale.

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