KB Financial Group's rights issue 98.45% subscribed

KB Financial Group's rights offering was 98.45% subscribed when it closed last week, according to a company statement filed to the US Securities and Exchange Commission. Although the deal was slightly undersubscribed, it was also fully underwritten, which meant the group was still able to raise the full W1.12 trillion ($914 million at today's exchange rate) that it was seeking, making it the second Korean bank to raise funds from a rights offering this year.

In March, Shinhan Financial Group raised W1.3 trillion ($880 million) from a rights issue that was also slightly undersubscribed.

KB Financial, which owns Korea's Kookmin Bank, said in the statement that the underwriters had found buyers for approximately 20% of the shares that weren't initially subscribed for by existing shareholders or those having bought nil-paid rights in the market, and had themselves bought the remaining 298,244 shares -- at a cost of W11.1 billion ($9 million).

The company offered a total of 30 million shares, or 8.4% of its outstanding share capital, on the basis of 0.07768392 rights share for every one existing share. Of the total, 20%, or 6 million shares, were offered to members of its employee stock ownership association. These shares were taken up in full. The remaining 24 million shares were offered to existing holders of KB Financial's common shares or its American depositary shares (ADS). These holders subscribed to 23.6 million shares, or 98.45% of the number of shares offered to them, according to the statement.

After deducting underwriting, management and selling fees of 60bp per share, KB Financial received total proceeds of W1.11 trillion ($907 million). The bank has earlier said that the offering will strengthen its pro-forma consolidated tier-1 capital ratio from 8.6% to 9.12%, while its ratio per the Bank for International Settlement guidelines will improve from 12.14% to 12.66%.

The offering price was W37,250 per common share, which translated into $29.95 per ADS and represented a 32% discount to the closing price of W54,500 on August 21 -- the day the final price was determined. The price was equal to the lower of two reference prices set on July 22 and August 21, which in turn were arrived at by applying a 25% discount to a pre-determined formula that took into account the share price movement in the month leading up to each pricing date. In the case of KB Financial, the first reference price prevailed since the share price edged 2.4% higher between the two price setting dates, meaning the second reference price was the higher of the two.

Yesterday, the stock fell by 3.2% to W51,500 in a day where a near 7% drop in the China stock markets resulted in sell-offs across Asia. Korea's benchmark index dropped 1%.

Morgan Stanley and Samsung Securities acted as joint global coordinators and bookrunners and were joined at the bookrunner level by Goldman Sachs and Korea Investment & Securities. All four banks acted as underwriters for the issue.