Hyundai Motors mandates new bond as Kexim roadshows

The fourth quarter pipeline continues to slowly unfold as Hyundai Motors mandates a second bond and Kexim launches roadshows.

Hyundai Motors (HMC) appears likely to launch its second international bond deal in as many months after mandating Citigroup and UBS for a $400 million issue. Non syndicate bankers believe the deal is likely to surface in late November and proceeds will fund a new car plant in Alabama, which requires financing of roughly $940 million over the next two years.

During roadshows for a previous $400 million issue in early September, HMC officials outlined the company's intention to raise more funds for the plant, so the quick return to the market is unlikely to faze many investors. What is more surprising is the omission of the company's old house bank, Credit Suisse First Boston.

The US house has had a virtual stranglehold over both HMC and its sister company Kia Motor over the past few years and would have also known where bonds from the last deal were placed. However, borrowers often rotate mandates and the two new leads rank among the strongest lead managers of Korean bond deals.

The 5.5% September 2008 issue is currently trading at about 100.40% to yield 5.4%, equating to 205bp over Treasuries or 160bp over Libor.

Observers believe the second transaction should go as well as the first since the group offers diversity from the mass of bank credits and gencos that populate the Korean credit curve. With a Ba1/BB+ rating, its bonds also offer upside potential relative to low investment grade names from Korea, which trade up to 50bp tighter.

In research report published in September, UBS argued that, "HMC's business profile and financial characteristics are already indicative of a mid-BBB rating profile."

In the meantime, Kexim launches roadshows on Friday for a $400 million five-year transaction via Bank of America, Barclays and UBS. Presentations kick off in Hong Kong, followed by Singapore on Monday, Switzerland and Germany on Tuesday and then London on Wednesday. Pricing should follow shortly after.

Despite the popularity of five-year paper among Korean borrowers, there is currently no policy bank paper at this part of the curve and the fact may play well with investors. Kexim's most liquid bond is currently its 4.25% November 2007 issue, which was re-opened in May this year and has $1.1 billion outstanding.

The A3/A- rated deal is trading at around 66bp over Treasuries, or 57bp over Libor.

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