Kexim to launch euro benchmark

The first Korean benchmark issue of the year is expected to price before Chinese New Year.
The Export Import Bank of Korea (Kexim) has mandated five banks to lead its forthcoming benchmark bond issue in euros. The firms include Citigroup, Deutsche, Merrill Lynch and UBS. But it is the fifth name, Depfa Bank, that will surprise rival debt houses.

Depfa is one of the biggest buyers of Korean debt, and has been making a push to lead more debt offerings from Korea. This transaction will mark its first role as a bookrunner in Asia.

Roadshows for the deal will start next Thursday, with the plan being to price ahead of Chinese New Year. The 10-year deal will be issued in euros, with the size expected to equate to $1 billion. The transaction is likely to be fixed rate, but the option of launching a dual-tranche floating-rate note has not been discounted.

It will be an interesting return to the markets for KeximÆs charismatic borrowing chief, Sung-uk Hong. Director Hong has built a reputation over the years as an astute borrower, but his last foray into the bond markets with Kexim in September struggled. That dual-tranche deal was downsized from $1 billion to $800 million, closed later than scheduled and at a wider price than expected. Indeed, investors were said to be deterred by ambiguous price guidance during the roadshow, and the fixed-rate component of the deal ended up pricing at 33bp over mid-swaps.

Since then, however, MoodyÆs has upgraded Kexim two notches above the sovereign ceiling to Aa3 (from A3). And Hong has had a better experience in the markets when he helped with the launching and pricing of the highly successful Republic of Korea sovereign bond in December.

Hong no doubt wants to make this new benchmark bond issue for Kexim a success. It is reckoned he wants a big and successful deal û possibly upsized û that will help Kexim make a splash in euros û which it first issued back in October 2004.

No price guidance is yet available but it will be interesting to see what impact the MoodyÆs upgrade has on KeximÆs pricing relative to the Republic of Korea. S&P and Fitch both rate the RoK and Kexim at the same rating û A and A+ respectively.

The Export-Import Bank of Korea was established in 1976. The bank is an official export credit agency and one of Korea's three policy banks. Most of its financing is obtained from international capital markets and borrowings from foreign banks. According to MoodyÆs, the government of Korea controls the bank through the Ministry of Finance and Economy (60.1%), Bank of Korea (35.2%) and Korea Development Bank (4.7%) as of November 30, 2006.
¬ Haymarket Media Limited. All rights reserved.
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