LG Caltex mandates bond offering

The Korean oil refiner is believed to have mandated its first international bond offering since July 1997.
The kick-off meeting for a $300 million 10-year transaction is said to have taken place on Wednesday, despite the fact the company has continued to send out RFPs (request for proposals) to other banks.

Books for the euro-144a deal are said to have been awarded to Credit Suisse First Boston, with Deutsche Bank and Goldman Sachs winning slots as lead managers. All three banks refused to confirm or deny the rumours, although other market participants say the company has had a working shortlist for some time.

The company’s choice is hardly surprising given that CSFB led the bank’s last major international roadshow in summer 1999, while Goldman has led all three of the group’s Yankee bonds of 1995, 1996 and 1997, as well as a $250 million private placement from March 1998 that has recently matured.

Similar to SK Corp before it, the deal is expected to be extremely well received given the almost complete lack of international dollar issue from Korea over the past few years and the small size of the recent deals that have come and whet investors' appetites.

SK Corp, Korea's largest oil refiner provides the most recent comparable, having launched a $250 million five-year deal at the end of May. Also led by Credit Suisse First Boston, the Baa3-rated issue was priced at 255bp over Treasuries and closed yesterday (Thursday) at 242bp/240bp.

LG Caltex itself has a highly illiquid 7.5% 2007 bond outstanding that was quoted yesterday at 230bp/210bp, some 10bp inside of trading levels two weeks ago. Backed by its BBB-/Baa2 rating, the company is hoping to use proceeds from the new deal to re-finance short-term debt.

The launch is expected to take place in July, fast shaping up to be the busiest calendar month for Asian DCM this year.
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