KDB readies new FRN in euros

Korean quasi-sovereign set to go head to head with rival Kexim, with plans for new Ç500 million five-year offering.
Barclays Capital, Citigroup and ABN AMRO are expected to price a new Ç500 million five-year FRN for Korea Development Bank (KDB) later this week.

Officials for the A+/A/A3 (Fitch) rated quasi-sovereign are in London this week, keeping an eye on market conditions as they prepare to price the deal, which is expected either Wednesday or Thursday.

The group is not conducting deal specific roadshows this time round. Instead it met potential investors during a series of comprehensive non-deal roadshows earlier this month. Meetings were held in Singapore, Hong Kong, Tokyo, Frankfurt, Munich, Athens, Dublin, New York, Stanford, Los Angeles, Pasadena, and Newport. Supplemental conference calls were also held with investors in Boston and the Midwest.

No doubt KDB will try and price as aggressively as possible relative to rival Kexim. In early February, the latter priced a record-breaking $600 million five-year deal, becoming the first Korean issuer to break through 20bp level, when it came to market at 19bp over Libor. However, that deal has pushed out slightly in the past few weeks and is currently being quoted around the 20bp to 21bp level.

In a rivalry that has been marked by a sustained trend of one-upmanship, market experts believe KDB to try and price at 19bp to 20bp over Euribor mid-swaps, or 18bp to 19bp over Libor.

Some bankers believe this level might be a little punchy considering KDBÆs own February 2010 Euro FRN is currently quoted at around 20bp to 22bp over Libor.

However, KDB has become quite adept at pricing through its own curve. In November, it priced a $500 million seven-year FRN at 28bp over Libor. At that time, KDBÆs own 2012 offering was trading at 31.5bp over, meaning that it priced 3.5bp inside of own curve.

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