Woori seeks to take advantage of upswing in sentiment

Hot on the heels of KEB''s successful deal ABN Amro Bank and LB Kiel bring Woori to the market.

ABN Amro Bank and LB Kiel have launched a $100 million two and three year fundraising for Woori Bank. The financing follows the close of Korea Exchange Bank's $130 million deal late last week.

Banks interested in joining the transaction will earn a margin of 35bp for the two-year portion and 55bp for the three-year tranche. Fees to the market will be available on three levels. Co-arrangers contributing $12 million or more will earn 52bp for two years or 51bp for three, lead managers committing $7 million to $11 million gain 48bp or 45bp and managers pledging tickets of $3 million to $6 million 44bp or 39bp.

Although a total of nine deals have been completed for Korean banking assets so far this year many of them have been conducted either on a club or private placement basis. The few that have been launched into general syndication have been forced to offer a significant increase in pricing on their comparable deals from 2002.

The last deal for this borrower was signed in late 2002 with arrangers BNP, LB Kiel and Credit Lyonnais completing a $100 million two year club facility that offered a margin of 20bp. Its previous public financing was a $200 million transaction from July that was priced at just 19bp all-in for one year money.

Korea Exchange Bank's deal paid 52bp all-in for two years and 62bp for three years and received a good response from the market, leading the deal to oversubscription and being upsized from $100 million. Another recent deal, this time a $122 million fundraising for Kookmin Bank, was also increased after oversubscription and paid 38bp for two years and 48bp for three.

Both of these credits were able to secure funding well inside the 61bp and 72bp for two and thee years respectively on offer for the current Woori Bank deal. Analysts believe that this will attract investors to the asset, especially those that have lent to the borrower in the past as they will be able to obtain a sizeable yield pick up.

Market observers say that the premium to Korea Exchange Bank is due its state owned policy bank status, despite its lower rating of Ba1 compared to Ba2 for Woori Bank. Kookmin Bank is regarded by market participants as a better credit and carries a Moody's rating two notches higher at A3.

This weakening sentiment has hit all Korean borrowers as the corporates such as LG Chem have been forced to offer banks in excess of 100bp to secure funding. Dealogic figures show that Citigroup completed a private placement for the group earlier this year paid a margin of 90bp, much wider than the 86bp all-in it paid for three year money in 2002.

Bankers suggest that the increased pricing is down to a handful of factors as investors began to shun these assets at the end of 2002 when too many tightly priced deals hit the market. They also point to the heightening political tension on the Korean peninsula earlier this year and the subsequent review from the international ratings agencies, despite the eventual reaffirming of its A3 rating by Moody's.

Market sources say that other credits such as Shinhan and Cho Hung will be watching the progress of this financing with interest as they plan their fundraising strategies for the rest of the year. Figures from Dealogic show Cho Hung Bank has an outstanding $100 million deal maturing at the end of the year, while Shinhan has $206 million and Eu200 million due to mature this year.

Woori recently reported a healthy net income, increased and stronger asset base and strengthened capital base in its end of year figures for 2002. Officials close to the transaction are confident that, along with the yield pick up and the success of recent syndications, this financing will attract a good response from the market.

Responses are due June 11.

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