SSB/Citi has launched a $100 million three-year term notes facility into general syndication for Sun Metals. Sun Metals is the wholly-owned Australian subsidiary of Korea Zinc, the guarantor for the bullet deal.
The deal is priced at a spread of 85bp over Libor. Proceeds will be used for general working capital requirements and refinancing of a loan-style FRN maturing in September. In 1997, Sun Metals raised $120 million through a five-year deal, which priced at 65bp over Libor, stepping up to 80bp after September 2000. That deal was guaranteed by Korea Long Term Credit Bank, which is why Sun Metals was able to achieve tight pricing.
Pricing for the current deal comes close to Korea Zinc's $30 million club deal also arranged by SSB/Citi last month. The transaction paid a margin of 80bp over Libor. Prior to that, Korea Zinc's wholly-owned US subsidiary, Big River Zinc Corporation, tapped the loan markets in October 2001. According to figures provided by Dealogic, Big River paid a spread of 160bp over Libor for the three-year $25 million deal.
However, the difference in the pricing between the Big River deal and Sun Metals' latest transaction derives from improved sovereign ratings and correspondingly tighter spreads.
The present deal is likely to see good demand from Korean banks, which are not allowed to lend more than 20% of their total loan portfolio to a single borrower. Korea Zinc, the world's largest zinc producer, is not a frequent visitor to the loan markets. It remains to be seen whether the borrower will upsize the deal if it is oversubscribed. As of December 2001, Korea Zinc had a total debt-to-equity ratio of 152.90% and debt-to-assets ratio of 46.68%.
General syndication is slated to close in the first week of September. The current transaction pays lead managers on the top level, participation fees of 48bp over Libor (all-in of 101bp) for commitments of $15 million or above. Senior managers and managers joining the transaction on the lower level will receive participation fees of 39bp (all-in of 98bp) and 33bp (all-in of 96bp) for commitments of $10-$14 million and $5-$9 million respectively.