Kexim back in dollars

Policy bank attempts to diversify further into European investor base.

The Export Import Bank of Korea (Kexim) returned to the dollar market yesterday (Thursday) for the second time this year with a $500 million issue.

Led by Bank of America, Barclays and UBS, a five-year deal was priced at 99.599% on a coupon of 4.25% to yield 4.34%. At this level, it came at 115bp over Treasuries, or 72bp over Libor. Fees amounted to 17.5bp.

Pricing came after a week of spread widening highlighted by the secondary market performance of China's tightly priced global, followed by a couple of days of marginal spread improvement. Kexim's outstanding paper, for example, tightened 2bp to 3bp during Asia's trading day ahead of pricing, although it is still about 10bp wider than it was a week ago.

The bank's 4.25% November 2007 bond was quoted at 77bp over Treasuries at the time the new deal priced. Adjusting for the yield curve, bankers say the new deal has priced about 3bp wide of the old on a like-for-like basis.

Compared to the Korea Development Bank's November 2007 issue, it has come about 9bp wide on a like-for-like basis. Kexim has been trading at a 7bp to 10bp premium to KDB all year, having priced last November's Eurobond at a 3bp to 5bp premium.

It shows the bank still has some work to do to narrow the differential between the two, although the main strategic aim with the new deal was to widen Kexim's investor base and diversify away from bank investors. Total demand amounted to just over $1 billion, with participation from 90 investors, of whom 35 came from Europe and a large percentage were new holders of the paper.

By geography, the final order book is said to have split, 50% Asia, 40% Europe and 10% offshore US. This is an improvement on last November, when 65% was placed in Asia.

By investor type, 70% went to fixed rate investors and 30% to banks. Last November, banks accounted for 40%.

Kexim's director general of Treasury, Sung-uk Hong says he is very satisfied with the outcome. "For this transaction, we were very focused on trying to develop new investors and we're extremely pleased with the quality of accounts we attracted," he says.

He adds that one of the features of roadshow presentations was to highlight Kexim's unique role in Korea. "There are three policy banks in Korea, but we told investors that there are very clear differences between us," he explains. "We are Korea's export credit agency and the only domestic bank that has never recorded a loss in its entire history."

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