NACF releases price guidance for $500 million bond

The pricing is in line with the outstanding curve, leading bankers to expect a positive response.
KoreaÆs National Agricultural Cooperative Federation (NACF) has released guidance at 42bp over mid-swaps for its upcoming benchmark $500 million issue. The Reg-S A-/Baa1 10-year non-call-five bond is due to price on Thursday via ABN AMRO, BNP Paribas, Citi and HSBC.

Guidance is in line with the federationÆs outstanding curve. Its 2014, 2015 and 2016 sub-debt offerings are trading at 35bp, 38bp and 40bp over mid-swaps respectively, indicating a one-year maturity extension of 2-3 basis points. More, Hana BankÆs recent 2017 issue is currently trading on the secondary market at 40bp over mid-swaps.

The roadshow has already visited Singapore and Hong Kong, and is in London today. Demand is expected primarily from Asia and so far the order book has attracted $400 million worth of orders.

Sources expect a positive response to the deal. Investors are keen to get their hands on NACF paper since these bonds tend to sell on a buy-and-hold basis. The rarity of benchmark issues will also galvanise interest, and this issue is comparatively large. NACFÆs previous bonds were just $250-$400 million in size.

This latest offering is part of the federationÆs updated and upsized $4 billion global medium term note programme. Sources speculate that the proceeds are being raised ahead of Basel II, since most Korean banks are optimising their banking structures to cater for the expansion of their balance sheets. The federation's tier-1 ratio improved to 7.9% in 2006 from 6.7% in 2004 and its problem asset ratio decreased from 4.1% to 2.1% in the same period.

NACF, established in 1961 to improve the status of farmers in Korea and for balanced development of the national economy, is KoreaÆs second largest bank in asset terms. The federation plays a significant policy role to KoreaÆs banking system, while providing financing for the agricultural sector and acting as a financing arm to the Ministry of Agriculture and Forestry.
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