KT Corp launched its third US dollar denominated corporate issue late on Monday (July 12), raising $400 million from a 10-year Reg S 144A accelerated deal led by Goldman Sachs, JPMorgan, Merrill Lynch and UBS.
The A3/A rated notes priced inside of initial guidance of 100bp to 105bp over US treasuries. Pricing was fixed at 98.086% on a coupon of 4.875% to yield 5.122%. This equates to 98bp over 10-year US treasuries, or 55bp over Libor.
The deal was initially marketed to investors as a $300 million deal, but bankers increased the size after garnering overwhelming support for the deal, which closed seven times covered at the $2.8 billion level. It was allocated to 145 accounts of which 31% were from the US, 23% Europe, 23% Singapore, 14% Korea and 9% Hong Kong. By investor type, 50% were asset managers, 33% were banks with the remainder insurers.
This is the third US dollar bond for KT since 1997 and in terms of comparables; bankers had a perfect fit with the KT Corp 10-year 2014 deal, issued in June 2004 at a spread of 130bp over Treasuries. Throughout last week, that deal had been moving slightly around the mid-90's mark, but had settled at 95bp over Treasuries or 53bp over Libor at the time of pricing - meaning the new deal placed just 1bp to 2bp outside of the existing curve.
It appears the most difficult task with this deal would have been placating all of the accounts during allocation.
The impressive pricing can be largely attributed to scarcity and quality of KT credit. The group's 2014 deal has performed well in the secondary market, tightening by almost 40bp since June. KT Corp is a rare issuer and demand for single A Korean paper helped drive demand.
The new deal also performed well yesterday, tightening around 6bp to trade mid-afternoon around 91bp to 93bp over.
KT is choosing to tap the market now in order to take advantage of lower borrowing costs following a recent upgrade to A3 by Moody's. It has $400 million debt maturing later this year.
In recent months analysts say KT, which owns over 95% of Korea's fixed-line telephone and services half of the nation's broadband Internet subscribers, has been under heavy earnings pressure as the company reaches saturation point in both markets.