Hyundai Engineering block swept up at 3% discount

A group of Hyundai Engineering & Construction's major creditors last night sold an 11% stake in the company in a highly sought-after deal, which allowed them to raise W779.9 billion ($618 million).

This is Korea's second largest sell-down this year after Royal Philips Electronics' $794 million exit from LG Display, which was completed on March 11, just as the Asian equity markets began the recovery that is now into its ninth week. Partly because of the improved market backdrop since then, the Hyundai transaction was able to achieve a significantly tighter discount of only 3%, versus 7.9% for LG Display.

The shares were offered at a discount range of 3% to 6% versus yesterday's close of W65,000, but the wave of demand from both domestic Korean accounts and international investors, primarily from the rest of Asia, meant the bookrunners had virtually no choice but to price the deal at the tight end. According to one source, the deal attracted about $8 billion of orders during the five or so hours that the books were open.

The market was well prepared for the deal after the creditors agreed last month that they would lower their combined stake in the company from 49.7% to 35% and although the stock is already quite liquid -- this transaction accounted for no more than eight days of trading volume based on the three-month average -- investors welcomed the increased free-float and the opportunity to buy in bulk.