Korean banks look to raise funds

After a relatively quiet first nine months, are bankers set to face a deluge in the last quarter?

Loan bankers are preparing for a busy September following the traditionally barren month of August. A whole host of names have been sounding out banks and are looking to award mandates in the very near future with a view to getting their deals out into the market by the end of August.

Korean banks feature prominently amongst these and a trio have requested banks to bid for mandates. Analysts believe that more of these credits will come to the market as Dealogic figures show that there is almost $1.5 billion worth of loans due to mature by the end of the year.

Standard Chartered has teamed up with Sumitomo Mitsui Banking Corp, HSH Nordbank and Bayerische Landesbank to bid for a $200 million one, two and three year financing for Korea Exchange Bank. The last financing for KEB was a $130 million one, two and three year package that was completed in May this year with all-ins ranging from 42bp to 62bp depending on the tranche investors joined.

The other two potential transactions comprise a $150 million deal for KorAm Bank and a $200 million two and three year deal for Kexim. No bank groups have been formed for these two as of yet.

Korean banking plays have been conspicuous by their absence after raising almost $2.5 billion last year, the figure for 2003 stands at just $1.4 billion. Some bankers point to the oversupply in 2002 as the main reason why the dealflow has been so sluggish so far this year. Others agree with this sentiment, suggesting that the tight pricing offered also scared many investors away.

Those credits that have tapped the market this year have offered improved pricing and these facilities have proved very successful, showing that the appetite still exists, for the right price. Woori Bank employed the tried and trusted route with a $110 million, two and three year transaction in May through ABN Amro Bank and LB Kiel. This financing paid an all-in of 61bp for two years and 72bp for three years to co-arrangers contributing $12 million or more, substantially higher than the 19bp it paid for a $100 million one year loan in July 2002. This deal was met with euphoria in the market as bankers were able book a Korean banking asset at a decent price.

Bankers are hoping that the current round of fundraisings follows the pricing structure set out in this transaction and allows market forces more influence in the pricing decision. Some, such as Kookmin Bank, opted to employ a club style syndication which was well received with 17 banks participating. The $155 million financing was split between one, two, three and five year tranches.

Analysts say that the syndication prospects of these new deals hinge largely on the pricing that the borrowers are willing to pay, whichever strategy they adopt. Their credit stories are well known to the bankers in the region as they have each tapped the market regularly in the recent past. Market rumours suggest that the Kexim deal may well be pulled on this basis alone as the borrower is unwilling to bend on its requested pricing. Bankers point out that this stubbornness may have worked in the past as the financing would still get done, but in the current climate nobody is willing to touch a deal at the pricing they are asking for.

The other two borrowers have been more realistic with their pricing targets and loan syndicators believe that the market will welcome the transactions with open arms. Mandates are expected in the next one to two weeks.

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