Korean lender Shinhan Bank early yesterday morning priced a $500 million 5.5-year bond in a successful return to the dollar bond market.
The commercial bank held investor meetings around November but the deal was put on hold following a highly publicised management scandal that erupted late last year.
Former Shinhan Bank CEO Lee Baek Soon and former Shinhan Financial Group president Shin Sang Hoon were indicted on suspected embezzlement and both stepped down in December last year. Shinhan Financial’s chairman Ra Eung Chan had already stepped down in October, after saying he opened accounts using other people's names.
Since then, the bank has filled those key leadership posts and taken steps to put its house back in order. It went back on the road again on March 17 to meet with global investors.
This time around, what emerged was a smoothly executed deal that tightened in the secondary market. The offering was brought by the same group of bookrunners that took the bank on the road last year, namely Bank of America Merrill Lynch, BNP Paribas, HSBC, ING, J.P. Morgan, Mizuho and Royal Bank of Scotland. Shinhan Bank was a co-manager of the deal.
“We told the company to confront the issue rather than hide anything,” said a banker on the deal. “We targeted US investors and they took up 54% of the deal, proving that it was the right choice to tap the US market,” he added. Asian investors bought 38% and European accounts 8%.
The participation from European investors was “disappointing”, according to one of the leads, who noted that European investors perceived the deal as being priced too tightly and said they were more keen to support a government-owned bank. The deal was also competing with many other European commercial banks looking for money.
Shinhan Bank is the main subsidiary of Shinhan Financial. The latter's major shareholders are BNP Paribas and the Korean national pension service, which hold about 6.4% and 6.1% respectively.
The deal attracted a strong order book of $3 billion from 196 accounts. The bonds priced at Treasuries plus 205bp and tightened to Treasuries plus 196bp/195bp yesterday morning. The final guidance was Treasuries plus 205bp to 210bp and the initial guidance was in the area of 210bp.
The new bonds, which mature on October 4, 2016, priced at mid-swaps plus 165bp and came inside the existing Shinhan Bank 2015s, which were trading around mid-swaps plus 171bp.
Fund managers bought 53%, banks 16%, hedge funds 10%, government agencies 8%, insurance companies 9% and others 4%. The coupon was fixed at 4.125% and the notes were reoffered at 99.412 to yield 4.246%.
Indian Railway Finance Corp also priced its $200 million bond on Monday night. The deal gathered a $720 million order book split over more than 80 orders. The bonds priced at Treasuries plus 220bp, at the tight end of the final guidance of Treasuries plus 220bp to 225bp. The bonds tightened strongly to Treasuries plus 208bp/206bp yesterday afternoon.
Asia bought 92% of the deal and Europe 8%. Fund managers took up 47%, banks 20%, private banks 13% and others 20%. Bank of America Merrill Lynch was the sole bookrunner.
Unilever NV also became the first European multi-national company to tap the offshore renminbi bond market when it closed a Rmb300 million ($45 million) three-year bond on Monday. The bonds priced at a yield of 1.15%. Deutsche Bank and HSBC were joint bookrunners.
Debt pipeline builds
Fufeng Group, the largest manufacturer of monosodium glutamate in China and the largest manufacturer of xanthan gum in the world, has mandated Citi and Deutsche Bank as joint bookrunners for its debut US dollar-denominated bond.
The senior bond will come in the five-year non-call-three format and is expected to be launched following an investor roadshow in Asia, Europe and the United States. Roadshows started yesterday. The expected issue rating is BB by S&P and Fitch.
Global Dairy Holdings has mandated Bank of America Merrill Lynch as sole global co-ordinator and bookrunner for its proposed renminbi denominated US dollar-settled senior notes. Macquarie is a joint bookrunner. The deal is expected to be launched following a roadshow covering Hong Kong, Singapore and London.
Lotte Shopping, a leading retail operator in South Korea, has mandated BNP Paribas and Citi for a bond investor roadshow starting today. A benchmark US dollar bond is expected to follow subject to market conditions.
Longfor Properties has mandated Morgan Stanley and Standard Chartered Bank as joint global co-ordinators and joint bookrunners for its US dollar bond. Citi and HSBC are also joint bookrunners. The issue is expected to be rated Ba3/BB by Moody’s and Standard & Poor’s. The deal is expected to launch following a global roadshow that started on March 28.
Elsewhere, Mitsubishi UFJ Lease & Finance has mandated Morgan Stanley as sole manager for its proposed renminbi-denominated bond offer. The issue is expected to be launched in the near future subject to market conditions and will follow a roadshow in Hong Kong that starts today.