The Reg-S transaction priced at par on a coupon of 20bp over three-month Euribor, equivalent to 18bp over Libor on an asset swap basis. At this level, it is the tightest Euro-denominated five-year offering from Korea since the financial crisis.
Following up on its success last November, KDB once again managed to price through its own secondary curve. KDBÆs own February 2010 Euro FRN was trading at 20bp over Libor, meaning that the new deal comes 2bp inside its curve.
In November 2005, KDB priced a $500 million seven-year FRN at 28bp over Libor, which closed 3.5bp inside of its own 2012 deal, which was trading at 31.5bp over.
Fellow Korean policy bank, Kexim, launched a record breaking $600 million five-year FRN in early February, becoming the first Korean issuer to break the 20bp ceiling in the five-year space. That deal priced at 19bp over Libor, but has pushed out slightly as markets widened over the previous few weeks and is currently trading at 20bp over.
Since 2004, KDB has maintained an aggressive pricing strategy in order to establish benchmarks for other Korean borrowers. Over that time it has continued to price at least 1bp through Kexim equivalents.
Following extensive non-deal roadshows meeting potential investors throughout February 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.
With the European Central Bank raising rates, investor appetite in the FRN market is once again on the up-tick, which is further underlined by the deals distribution statistics.
The deal was two-times over subscribed with a total order book of about $1billion, with 31 accounts taking part. Geographically 74% of the book went to European accounts, although some of that total was made up of off-shore US accounts. The remaining 26% came from Asia.
In terms of investor type, Banks bought 80%, funds took up 15%, while private and central banks bought up the remaining 5%.
KDBÆs Director Kim says he is particularly pleased with the deal. With KDB looking to raise over $3 billion through the debt capital markets this year, Kim says it was important to establish a clear benchmark right away.
ôWe're very excited at this pricing level," he says, "But we expect the markets to be somewhat volatile in the year ahead, and this deal gives us a clear indication that we have a excellent investor base with a strong appetite for our credit story.ö