Shinhan mandates four for new dollar deal

As Shinhan submits its bid for a controlling stake in LG Card, South KoreaÆs second-largest financial services provider hires four international banks to lead its second offshore deal of the year.
South KoreaÆs Shinhan Bank has mandated ABN AMRO, Barclays Capital, JPMorgan and Morgan Stanley for a proposed dollar-denominated bond offering.

As yet the structure and overall terms of the deal are still being finalised.

In recent years Shinhan has been a regular issuer of offshore bank capital transactions, having sold into both the hybrid tier-1 and upper tier-2 spaces.

In February, Shinhan priced a subordinated upper-tier-2 offering, raising $300 million via Barclays Capital, BNP Paribas and HSBC. When that deal came to market, it came inside of initial guidance at 99.901% on a coupon of 5.75% to yield at 5.773%. That equated to a spread of 71bp over swaps or 121.5bp over five-year treasuries.

Currently that deal is trading at a bid to offer of 98.48% to 98.79%, a yield latitude of 6.13% to 6.06%. On a spread basis that works out to 127bp to 120bp over treasuries or 75bp to 69bp over asset swaps.

That deal, a 10-year non-call five-year step up, was used to re-adjust ShinhanÆs capital adequacy ratio (CAR) ahead of its merger with sister bank Chohung.

In February of 2005, Shinhan launched a debut hybrid tier 1 deal, raising $300 million via Barclays, BNP Paribas and Merrill Lynch. The extendible 30-year, with a call option in year 10, was priced at par on a coupon of 5.663% to yield 138bp over treasuries or 99bp over Libor.

That deal is presently quoted at a bid offer of 92.56% to 93.09%, to yield at 6.82% to 6.74%, or 188bp to 180bp over comparable treasuries or 127bp to 120bp over swaps.

Shinhan, South KoreaÆs second-largest financial services provider, has a strong track record with international investors and has historically enjoyed significant support from Europe. Shinhan's most recent deal attracted a huge order book of $1.6 billion, an oversubscription ratio of 5.3-times, with 97 accounts taking part, with 60% of the total allocations going to European books.

Any deal is also likely to benefit from a recent ratings upgrade by MoodyÆs of 11 Korean financial institutions, including Shinhan. ShinhanÆs long-term senior debt rating was raised from Baa1 to A3 with a ratings outlook of positive.

Concurrently, Shinhan is also in the process of bidding for a controlling stake in LG Card. Itself along with Hana Bank and National Agricultural cooperative (NACF) submitted bids on August 10th to purchase between 51% to 72% of LG Card, which has a market value of W5 trillion ($5.2 billion), from its creditors.

LG CardÆs creditors, include Korea Development Bank, the largest shareholder with a 22.93% stake, NACF, Kookmin Bank, Woori Bank, Industrial Bank of Korea and Hana Bank.

Creditors took control of the former card arm of LG Group in 2004 after saving it from bankruptcy through a W5 trillion ($5.2 billion) debt-for-equity swap and a further W1 trillion ($1.04 billion) bailout.

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