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.