LG Electronics (LGE), Korea's second largest electronics manufacturer has finally been able to raise the full $600 million it was looking for, after being forced to postpone one attempt last month. Under the lead of Citigroup, Credit Suisse First Boston, Lehman Brothers and Korea Development Bank, the Baa3/BBB- rated group priced a five-year fixed rate deal on Friday (June 10).
Back in mid-May the group had set out with hopes of rasing $600 million via twin five and 10-year tranches, which had been respectively marketed at 120bp and 140bp over Treasuries. The deal was restructured last week as a straight five-year tranche, with a provisional issue size of $400 million and indicative range of 130bp to 135bp over Treasuries.
It was priced at the tight end on the back of an order book, which closed three-and-a-half times covered. The deal carries a coupon of 5% to yield 5.11% or 130bp over the 3.625% five-year Treasuries.
The deal is relatively unusual as it offers investors diversification away from the wash of Korean quasi sovereign credits and banks that normally access the market. As such there are few benchmarks, although Baa2/BBB rated LG Caltex has a 7.75% July 2011 bond outstanding.
Funds are primarily being used primarily to refinance existing debt. LGE has a $300 million FRN maturing later this year and approximately $425 million maturing next year.
In its ratings release Moody's said that LGE may get upgraded if it can bring debt to capitalization down below 55% or downgraded if it rises above 70%. At the end of December 2003, the agency said the figure stood at 65.5%.
