Although the deal didnÆt require much innovation and came swaddled in a guarantee from Korea Development Bank, it required good execution to achieve the 25bp over yen-Libor pricing.
"ItÆs a fantastic deal," says one rival banker. "ItÆs great to see a repeat issuer in the market and in the future it would be good to see some issuers moving away from the KDB guarantee."
There is certainly enough liquidity in the market. One bank that pitched for the deal said investors were queuing up to buy Korean Air's deal even before the mandate was awarded.
Two other deals are set to tap this demand in the next few months. KookminÆs residential mortgage-backed deal, which is being arranged by ABN AMRO, ING and JPMorgan according to market participants, may be one of the first unwrapped deals and is rumoured to be raising $1 billion. Hyundai Card is also thought to be close to mandating bookrunners for an asset-backed deal.
Korean Air will use the funds from the deal, which is its third yen future-flow deal, to finance fleet expansion and working capital. The receivables backing the notes include ticket sales on flights between Korea and Japan, and other onward destinations. Korean Air operates 234 flights a week between Japan and Korea and says it commands 42% of the scheduled airline market between Korea and Japan.