Woori prices Asia's largest ever tier-1 bond

The Korean bank also prices inside the curve of its rival Shinhan Bank.
Woori BankÆs $1 billion Reg-S, 144a, hybrid tier-1 bond offering priced last night at the tight end at 157bp over Treasuries (104.5bp over mid-swaps, or 103bp over Libor). ABN AMRO, Credit Suisse, Deutsche Bank, HSBC, Merrill Lynch and Woori Investment and Securities handled the deal.

Final guidance came in at 157bp-159bp over 10-year Treasuries, after an initial guidance in the area of 160bp. The Baa2/BBB/BBB+ 30-year non-call-10 bond priced at par with a coupon of 6.208% semiannual, (30/360 to first call, FRN after), and an order book four times subscribed at over $4 billion.

Typically, there are between 50 and 70 investors that participate in tier-1 deals, and most of these are US investors. In Woori's case, 215 investors participated in the offering, with 43% of the bonds sold to Asia (including roughly 50% to Singapore, and 30% to Hong Kong), 40% to the US, and 17% to Europe. 25% of the bonds were allocated to banks, 61% to funds, 12% to pension funds, insurance companies and central banks, and 3% to retail. Investors will enjoy a yield of 6.15%-6.2%.

In terms of comparatives, Shinhan Bank's 2016s are trading at 106bp over Libor, while a new Shinhan 2017 issue would be expected to trade at 108bp-109bp. Woori has traditionally traded two to three basis points wider than Shinhan in senior debt, and five to eight basis points behind in lower tier-2. Here, for the first time, Woori has managed to price inside the Shinhan curve, at the most junior level of capital structure.

The offering is the largest tier-1 deal out of Asia, a position formerly held by DBS with its AA-rated $725 million perpetual callable and step-up issue (7.657%). This was bookrun by ABN AMRO, Barclays and Morgan Stanley in 2001. The Woori bond is also three times larger than any previous tier-1 bond from Korea. Shinhan Bank has a February 2016 (5.75%) bond in the market which had an issue size of $330 million.

The Woori bonds are expected to tighten slightly on the secondary market. Investors have been disappointed with recent Korean deals, which have priced exactly on the margin, thereby underperforming in secondary trading. For example, LG Caltex was trading yesterday at either side of the issue price at 99-97. In contrast, the size of Woori's deal required more favourable pricing for investors, at levels where the market was likely to clear it.
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