shinhan-prices-second-hybrid-tier1-deal

Shinhan prices second hybrid tier-1 deal

The Korean bank brings its first deal since winning the LG Card bid and becomes the first Asian bank to have multiple tier-1 transactions in the market.
Joint book runners ABN AMRO, Barclays Capital, JPMorgan and Morgan Stanley have priced Shinhan BankÆs second hybrid tier-1 deal inside its existing tier-1 curve and in line with guidance.

The leads kicked off roadshows for the $350 million 30-year non-call 10 deal last week meeting investors in Singapore, Hong Kong, London and Frankfurt, and released initial guidance on Tuesday at the 10-year US Treasuries plus 205bp level.

Final pricing on the Baa2/BBB/BBB+ rated Reg-S only deal came at par with a semi-annual coupon of 6.817%. That equated to a spread of 205bp over comparable Treasuries or 149bp over Libor.

The A3/A-/A- bank now becomes the first non-Japan Asian bank to have two outstanding tier-1 deals in the market concurrently.

In February 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 bond is currently trading at 10-year US Treasuries plus 200bp or 150bp over swaps. Meaning that the new deal prices with no new issue premium and, given its longer maturity, comes inside ShinhanÆs existing curve.

The deal also marks the bankÆs first international transaction since Shinhan won the bidding war for LG Card last month.

Shinhan, South KoreaÆs second-largest financial services provider, has a strong track record with international investors and has historically enjoyed significant support from Europe.

In terms of investor breakdown, Singapore-based investors took the lionÆs share with 32%, followed by UK investors with 21%. Hong Kong accounts took 16%, Korean took 11%, while other European accounts took 16%, other Asian accounts took 3%, and offshore US accounts bought 1%.

By investor type, asset/fund managers and banks each took 45% of the total deal, insurers bought 1%, and the remaining 9% went to others.

Korean sub-debt paper has historically rewarded investors as it offers a yield premium relative to the outstanding hybrid universe. European hybrid deals are typically higher rated than the Korean bank deals and trade at much tighter levels.

However, with the Korean bank sub-debt deals mostly investment-grade rated, but subject to the Asian premium, they are considered a safe investment and provide investors with nice yield kicker

Shinhan has recently been awarded the winning bid for a controlling stake in LG Card. It beat Hana Bank and National Agricultural cooperative (NACF) to purchase between 51% to 72% of LG Card from its creditors. LG Card has a market value of W5 trillion ($5.2 billion).

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 debt-for-equity swap and a further W1 trillion bailout.



























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