South Korea’s KEB Hana Bank sold $500 million of floating-rate notes this week, turning to investors in the format for the first time since a merger two years ago.
Taking the 144A/Reg route, the group — which was created through a merger between Korea Exchange Bank (KEB) and Hana Financial Group — drew $800 million of orders from 49 accounts. That may have appeared small compared to the $1.9 billion orderbook that Shinhan Bank achieved for its $500 million five-year note last week, but bankers said the response was a boon for the issuer.
“The peak orderbook reached $950 million before final price guidance, which was a pretty satisfying result for the issuer,” a syndicate banker running the deal said.
US investors received a chunky allocation of KEB Hana’s latest trade, and ended up representing 33% of the entire book. Asian investors took 61%, while the remaining 6% went into accounts in Europe, the Middle East and Africa (EMEA). On Shinhan Bank’s March 2022 bond, American investors only took a quarter. Asia and EMEA investors were allocated 57% and 18%, respectively.
“In KEB Hana’s new deal, there was good demand from US accounts because they generally like short-dated bonds,” said the syndicate banker. “We priced the deal basically flat to the outstanding curve.”
Initial guidance was pitched at around 90bp over three-month Libor rate, before being narrowed to 2.5bp each side of 70bp over Libor. Final pricing of the April 2020 floater was fixed at par to yield 72.5bp, according to a term sheet seen by FinanceAsia.
In terms of fair value, the group’s outstanding 1.75% $350 million 2019 bond and 2.125% $300 million 2021 bond were the best gauges for sizing up the new deal. The former was trading at 111bp over two-year US Treasuries, or a G-spread of 95bp, while the latter was trading at 103bp over five-year US Treasuries, or a G-spread of 111bp.
In the secondary market, the new KEB Hana bonds were quoted at 72bp on the bid side on Tuesday afternoon, according to market data.
Since a September 2015 merger, the bank — rated A1/A+/A- by Moody’s, S&P and Fitch — turned to the international bond market twice last year, issuing a $300 million 2.5% 2021 bond in January and a $650 million dual-tranche sale in October.
The bookrunners of the new deal were BofA Merrill Lynch, BNP Paribas, Commerzbank, HSBC, ING, KEB Hana Global Finance and SocGen. Hana Financial Investment was a co-manager.
