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Korea set to market sovereign bond next week

The $1 billion benchmark deal will be the government's first foray into the international debt markets in almost two years.
The Korean government is to embark on a roadshow to market a $1 billion dollar-denominated bond expected to be launched later this month. The main purpose of the sovereign bond issue, which comes after a two-year gap, is to set a benchmark that will encourage Korean banks and corporates to come into the offshore debt market.

The sovereign will have a maturity of 10 years and is expected to be priced at about Libor plus 110bp, a source says. The Korean bond market is pretty liquid as the country enjoys an A2 rating from MoodyÆs and an A rating from Standard & PoorÆs. As a result, the sovereign is expected to get strong support from US institutional investors, especially fund managers and pension funds, the source says.

Sources say that the pipeline for Korean bonds is expected to become heavy in the coming months, as banks and Korean corporates take the opportunity, with insurance premiums easing, to raise debt. They say investors are more receptive to Korean bonds as there has been a lack of good quality Korean bonds coming into the market since the subprime crisis broke out in mid-2007. Market practitioners have been guardedly optimistic that the last quarter of the year is expected to see a steady supply of debt paper issuance from Korean banks and companies, as the market outlook improves and investors once again regain the appetite for debt.

The Korean government last tapped the international bond market in December 2006, issuing a 10-year $500 million dollar-denominated bond and a 15-year Ç375 million bond.

An investor says the demand for good quality debt is growing and Korean debt issuance is highly rated by investors. Korean sovereigns have been well received by institutional investors on previous occasions and he expects the current issue, even though small, should get brisk subscription.

The roadshow will start next week in Boston, with stopovers in London and either Hong Kong or Singapore. Five banks, including Barclays Capital, Goldman Sachs, HSBC, Lehman Brothers and UBS, have been mandated for international marketing, while KDB Securities will be the local partner.
¬ Haymarket Media Limited. All rights reserved.

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