HyundaiCard issues debut dollar bond

The $400 million three-year FRN prices tight of guidance at 43bp over three-month Libor.

HyundaiCard, Korea's biggest credit card company, performed well yesterday when it priced a debut $400 million three-year corporate FRN at par, at 43bp over three-month Libor. Initial price guidance was released Tuesday at 45bp-50bp over Libor, and tightened to 43bp-45bp yesterday. Barclays Capital, Morgan Stanley, the Royal Bank of Scotland and UBS managed the deal.

The offering, rated BBB/BBB by Standard and Poor’s and Fitch, was over three times oversubscribed. It attracted 50 investors with 62% of the bonds allocated to Asia and 38% to Europe. 68% were sold to banks, 29% to funds, and 3% to other. The smallest ticket was $200,000, while the biggest order came in at $100 million, with chunky demand from the Hong Kong branches of European and Japanese banks.

Introducing the new credit to international investors, HyundaiCard executed a couple of non-deal roadshows, the most recent of which was in March when the company met with investors in London, Singapore, Hong Kong, and Edinburgh. The deal roadshow encompassed Hong Kong, Frankfurt and London.

There were very clear comparables for the transaction. HyundaiCard’s sister company Hyundai Capital’s 2012 bonds were trading at 103bp over Treasuries, or 57bp over Libor, while its 2010s were trading at 82bp over Treasuries, or at 47bp over Libor.

Triple-A rated GECC’s investments in HyundaiCard and Hyundai Capital have allowed it to get a foothold into the rapidly growing Korean consumer finance market, and are critical to the HyundaiCard’s credit quality. GECC holds a 43% stake in the company, while Hyundai Motors Group owns 51%. GECC is active in management, and has helped revamp and improve the credit risk capabilities of the company, implanting GE global best practices into both HyundaiCard and Hyundai Capital.

The company also has a strong rating trajectory. It received its Fitch rating three months ago. Since then, its outlook has already been upgraded from stable to positive.

“This particular instrument is not expected to give much total return, but is of interest to buy-and-hold investors who are attracted to the coupon. There are not many Korean corporate deals that offer a decent spread, and this is not a bad way of getting Korean exposure”, says one source.

At the end of 2006, HyundaiCard’s capital adequacy ratio stood at 24%, with a recorded net income of W281 billion ($300 million), and W3,733 billion ($4 billion) of total managed assets on its balance sheet.

¬ Haymarket Media Limited. All rights reserved.
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