Kumgang begins roadshows

Presentations begin in Hong Kong today (Tuesday) for a $100 million tap.

Investor roadshows for Korea's largest diversified manufacturer of glass, industrial paint and building materials, continue in Singapore on Thursday and New York the following Monday, with pricing expected Tuesday.

Led by JPMorgan, Kumgang Korea Chemical (KCC) is hoping to re-open its $100 million bond of June last year, in what should represent a welcome liquidity boost to a small and closely held issue. The 7.625% June 2008 deal is currently bid at 105% to yield 6.61% or 220bp over Treasuries. Originally priced over a 10-year Treasury and now quoted over a five-year, the deal has tightened 50bp in spread terms and 101.5bp in yield terms since launch.

KCC is one of only three investment grade rated non government-owned Korean corporates and was boosted last month by an upgrade from Standard & Poor's from BBB- to BBB. It has a Baa3 rating from Moody's.

At current levels, however, it has still upside potential relative to comparable benchmarks such as BBB-/Baa3 rated SK Corp, which has a one notch lower rating from Standard & Poor's. The oil refiner has an outstanding issue two years shorter than KCC, but 91bp tighter in yield terms. Due May 2006, the $250 million 7.5% deal is bid at 106% to yield 5.7% or 135bp over Treasuries.

KCC has been in consistent debt reduction mode for the past few years. Over the course of 2001, the company reduced total debt from $380 million to $327 million, in the process improving debt to EBITDA from 1.6 times to 1.2 times and boosting its EBITDA to interest coverage ratio to 14 times.

In its recent ratings release, S&P commented that the company's rating reflected, "a strengthened financial profile and solid performance in each of its major business segments, offset by its lack of geographic diversification.

"Although KCC's results will fluctuate in line with economic cycles in Korea," the report added, "its very strong domestic market positions and moderately conservative financial policies should allow it to maintain a sound credit risk profile."