Korea Gas Corporation (Kogas) is poised to issue an RFP (Request for Proposals) for a debut dollar deal it had originally hoped to complete earlier this year. A prospective transaction was delayed in the spring as a result of board level changes and is now expected to re-emerge in late October/early November with either a five or a 10-year maturity.
Credit Suisse First Boston is considered frontrunner for the offering by dint of its ratings advisory role. Kogas has the sovereign A3/negative rating from Moody's, but is rated two notches lower than the sovereign by Standard & Poor's at A-/stable.
Bankers say the nearest pricing comparable is probably Korea Hydro & Nuclear Power, which is also government-owned and has the same rating. However, 100% government-owned Korea Hydro is on positive outlook from S&P, necessitating a pricing premium from 62% government-owned Kogas, which is on stable.
Korea Hydro's outstanding 4.25% January 2008 bond was yielding 4.25% during Asian trading hours yesterday, equating to a spread of 113bp over Treasuries or 97bp over Libor.
In its rating outlook issued in late July, Moody's also emphasised that Kogas is weaker than the sovereign on a stand-alone basis and will not necessarily get upgraded with a sovereign upgrade. It said it considered the company's financial profile weak for its rating level. It cited high leverage and significant off-balance sheet liabilities arising from its vessel hire-purchase leases.
At the same time, it said that rating was supported by the company's, "monopoly business position and the gas industry's protective tariff regime, which supports stable cash flow."
This time a year ago, the company completed a debut Samurai issue via DaiwaSMBC.