KDB goes to loan market

The Korea Development Bank has gone to the loan market, shunning the high prices that bond investors are demanding.

The Korea Development Bank (KDB) has successfully closed the arranger group of its first syndicated loan deal in nine years, emphasizing the growing resurgence of loan market products in Asia over the bond markets.

The three year, $300 million deal is priced at 52 basis points (bp) over six month Libor and carries front end fees of 39bp. Lead arrangers of the deal are Chase Manhattan, Barclays Capital and IBJ. Arrangers of the loan are BNL, Bayerische Landesbank Girozentrale, ICBC, KBC Bank, Tokyo-Mitsubishi International and WestLB.

The loan is fully underwritten by the lead arrangers and arrangers and general syndication started on Monday, October 30. The documentation for the deal has been set so that banks can book the deal either as a loan or an FRN. While all the leads and arrangers have booked it as a loan, the feeling is that with the added flexibility of FRN booking, more banks will be able to come in at the sub-underwriting stage.

According to Jose Cortes of the syndication team at Chase Manhattan, the deal has a certain amount of rarity value, given that the last time KDB went to the loan markets was in 1991. "There is also a big relationship pull to this deal," he adds. "As a credit, KDB is second only to the sovereign and so demand should be strong."

The deal is a good one for KDB. The bank has achieved cost effective financing in the loan market, cheaper than it would have managed in the bond market. The deal has locked in finance at a cost 30bp cheaper than the current yield on KDB's November 2003 bond, according to Cortes.

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