IBK, which is rated A3/A-/A+, by Moody's, S&P and Fitch, respectively, priced the Reg S deal at par on a quarterly coupon of 27bp over Libor.
Taking advantage of the increasingly strong appetite for floating rate notes in the international debt capital markets, particularly in Europe, IBK was able to achieve its tightest ever pricing level in the five-year space. Previously, the Korean policy bank tapped the market in September of last year with a similar $500 million FRN. That deal priced at 33bp over Libor.
Coming 6bp tighter to its earlier deal, allows IBK to keep pace with KoreaÆs better known quasi-sovereigns; Korean Development Bank (KDB) and the Export-Import Bank of Korea (Kexim). Both of these have brought similar FRN deals to market this year, and both have priced inside of their own respective five-year curves.
In February, Kexim completed a $1 billion-equivalent dual tranche deal that was split into a $600 million five-year fixed-rate offering and a Ç325 million seven-year FRN tranche. On an asset swap basis, the five-year tranche priced at 19bp over Libor coming 2bp inside of its own March 2010 which had tightened to 21bp over.
Similarly, KDB completed a Ç500 million five-year FRN, also in February. That deal priced at 18bp over Libor on an asset swap basis. At that time, KDBÆs own February 2010 Euro FRN was trading at 20bp over Libor, meaning that the new deal came 2bp inside its curve.
With W86 trillion in assets, IBK is the second largest of KoreaÆs three policy banks. However, both KDB and Kexim are higher rated (A3/A/A+) than IBK and therefore regularly price around 7-8bp tighter than IBK.
The order book was closed at just over $1 billion, an oversubscription ration of two-times, with a total of 70 accounts being allocated paper.
By geography, Europe made up the overall majority of the book, accounting for 40%, China, Hong Kong and Taiwan were allocated a total of 33%, Singapore and Malaysia 20% and Korean accounts 7%.
In terms of investor type, banks bought up the lions share with 73%, with asset managers and other accounts accounting for the remaining 27%.
The notes were issued off of the bank's $3 billion global MTN programme.
IBK is the primary funding vehicle for specialised small and medium sized enterprises (SME) in Korea, with a focus on the smaller scale SMEs which are traditionally under-served by the countryÆs commercial banks.
As outlined in the Industrial Bank of Korea Act, the government of Korea has a legal obligation to maintain the reserves of IBK, and provide for any deficit that may arise if reserves are insufficient to cover any annual net losses.
The Korean government owns a 67% stake in IBK. Directly, it controls 51%. Indirectly, Kexim owns 3% and KDB owns 13%.