ABN AMRO, Barclays and HSBC have launch the first Euro-denominated bond for Korea Electric Power Corp (KEPCO) in over six-years with a E250 million five-year deal that priced at the aggressive end of the deal's revised guidance.
Initially marketed to investors last week during roadshows at 35bp over mid-swaps, guidance was cut to 34bp-35bp over. After building strong momentum in early roadshows in Asia bankers opted to limit the investor book and offer attractive pricing for the issuer before taking it to European investors. Pricing was fixed at 99.854% on an annual coupon of 3.125% to yield 3.157%.
This equates to 34bp over mid-swaps, or 32.5bp over Libor. Fees are 20bp.
The notes, rated A2/A- by Moody's and S&P - one level higher than the sovereign at A3 rating, were priced very aggressively compared to the recent Kexim 2010, which was trading at around 35bp over Libor prior to pricing.
The order book closed just south of the Eu600 million mark - an oversubscription ratio of 2.4 times - after a strong start in Asia was reinforced by high demand through out Europe.
It was allocated to 50 accounts, with the deal spit evenly between Europe and Asia. Of the European share, 18% originated in France and Germany, 13% from the UK, 12% from the Benelux and Switzerland, and 7 % going to other Europeans. In Asia, Singapore accounted for 29%, Hong Kong accounted for 11%, Japan 8%, with the final 2% going to other Asian accounts.
In terms of investor type, fund managers made up 40% of the total book, banks took 38%, agencies and central banks were allocated 18%, with private banks and insurers picking up the remaining 4%.
This is the first euro-denominated issue for KEPCO and the first issued in a European currency since 1999. It is also the corporate's first issuance since Moody's upgraded it to A2.
With the deal priced so aggressively and based on the scarcity of Korean Euro-denominated issuance and its relatively small size, bankers are not expecting to see much price action on the secondary markets over the next few sessions.
Kepco as South Korea's largest corporate borrower with $3.6 billion in outstanding overseas debt opted for a Euro-bond to diversify its funding requirements away from US dollars.
Kepco, 53.9% owned by the South Korean government, monopolizes the energy transmission and distribution sector in the country and controls almost 90% of its generation capacity.