But yesterday, IBK sold another M$400 million ($125 million) of bonds following reverse enquiries from another three investors, bringing the total size to M$1 billion, or $313 million.
The deal, which started out as a rather small transaction, matched similarly-rated Export-Import Bank of Korea in the size it finally managed to achieve. ôThe transaction was initially rather unambitious, but IBK did well in succeeding to raise this amount. I think itÆs worked out well for them,ö says a banker not involved in the deal.
As with Kexim, RHB and CIMB were joint lead managers, with Merrill Lynch acting as global adviser. The Malaysian bank Hong Leong was reportedly mandated on the deal, but was replaced by CIMB, leading market specialists to speculate that CIMB may have executed at least part of the swap.
The local banks were responsible for the distribution of the bonds. Twenty investors participated in the five-year tranche, which attracted demand of 1.4 times. The smallest ticket across all three tranches amounted to M$20 million, while the largest stood reportedly at M$100 million.
A source not involved in the deal says: ôLocal banks have an important role to play, and offer a wide sales coverage in terms of fixed-income sales accounts as they obviously can afford larger sales teams on the ground.ö Merrill Lynch's role, meanwhile, is reportedly one of intermediary between Korean borrowers and the unfamiliar faces at Malaysian banks.
The deal closed at 4.35% for the five-year M$550 million tranche, equivalent to 35bp over Klibor (although other sources estimate this to be closer to 40bp over Klibor); 4.8% for the 10-year M$50 million tranche, equivalent to 30bp over Klibor; and 4.18% for the three-year M$400 million tranche, equivalent to 45bp over Klibor.
ItÆs difficult to pinpoint the pricing in dollar terms, as with all ringgit transactions, since it depends on how the leads managed and entered into the swap. Specialists estimate the basis to have been around 130bp at the time of pricing, bringing the all-in cost for the five-year tranche to 170bp over Libor, or 165bp based on a pricing level of 35bp over Klibor. Another specialist estimates that the all-in cost for all tranches could have been as low as 160bp over Libor.
Relative to credit default swap levels (estimated at 130bp by more than one of source), the deal could have priced 30bp back from CDS. This compares to dollar deals that are pricing at 50bp-75bp back from CDS in the US.
The leads declined to confirm IBK's all-in costs over Libor, perhaps because its success was somewhat marred by Kexim's earlier achievements. Kexim achieved funding levels of around 100bp over Libor in dollar terms, pricing its deal at 4.08% in early March. ôKexim was the first Korean borrower to tap this market, but Malaysian investors now have their pick of Korean names and are asking for wider levels. Meanwhile, the swap basis continues to increase with the prospect of upcoming supply, so costs will continue to increase,ö says a source not involved in the deal. ôNot all the deals that have been announced will get done û the market is becoming more selective.ö
This may explain why Korea Southern Power (Kospo) has opted for the G3 market and is currently on the road marketing a $300 million 144A/RegS deal. The borrower is roadshowing in Singapore, Hong Kong, London and New York via leads ABN AMRO, Deutsche Bank and Citi.
The transaction, rated A1/A-stable, would be the first dollar deal to hit the markets since similarly-rated Korea Midland Power CompanyÆs (Komipo) $300 million bond in early February. ôThis is a good credit to potentially open the market with, since it can benchmark off Komipo,ö says a source.
The deal will launch subject to market conditions.
Meanwhile, Deutsche Bank yesterday announced that Hyundai Capital has postponed its foray into the ringgit market. However, this was due to the corporate facing the added problem of swapping the dollars back to Korean won. ôThe cross-currency basis swap market moved nearly 150bps in the last few weeks,ö says a source close to the deal.
In contrast, financial institutions such as Kexim and IBK keep their financing in dollars.
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