The Ba2/BB+ rated offering, upsized from $550 million to $650 million, has a $450 million 10-year non-call five-year fixed rate tranche and a $200 million five-year bullet FRN.
When initial guidance was released last Thursday - at 8.25% to 8.5% for the 10-year and 275bp over Libor for the five-year, the books had already garnered around $5 billion in orders, with one half of that coming from Asian-based investors. As expected the joint leads tightened guidance on Friday Asian time to between 8.125% and 8.25% for the fixed rate tranche and 262.5bp for the FRN.
The fixed rate tranche went on to price at par with a semi-annual coupon of 8.1%, representing a re-offer spread of 374.1bp over 10-year US Treasuries. The FRN also priced at par with a semi-annual coupon of 250bp over Libor. Fees were 1.67%.
The ten-year deal is callable on February 1 2011 at 104.05%, in 2012 at 102.7%, 2013 at 101.35% and at par for the two remaining call periods.
Roadshows kicked off in Hong Kong and Singapore in mid-January, before moving on to meet investors in London and New York last week. With the markets looking choppy on Friday, the borrower opted to continue the roadshow and met with investors in Boston on Monday, pricing the deal almost immediately after that meeting concluded.
The 10-year tranche was sold largely to US-based investors who accounted for 47% of the total book. Asian and European allocations were evenly split at 27% and 26%, respectively. The FRN was split 40% and 40% to Asian and European accounts, with the US taking up the remaining 20%.
In terms of investor type, asset managers bought up 68% of the ten-year, banks picked up 12%, insurance and pension funds 9%, private banks 11% and securities firms rounded out the book with 1%. Asset managers were the main buyers of the FRN at 52%, banks bought 29%, insurance and pension funds 5%, private banks 13% and securities firms 1%
Specialists point to fellow Korean corporate, Hanaro Telecom's existing $500 million seven-year deal as the most viable comparable. That deal priced to yield 7.125%, and was trading at around the 7.128% mark at the time of C&M's deal.
Although the most obvious comparable, it is difficult to place the two corporates on a level playing field. Hanaro is a well known credit among international investors and also benefits from the halo effect of being partly owned by a number of private equity firms. C&M, on the other hand lacks an established track record. Furthermore it is an unlisted company and in the eyes of some international investors may lack a certain level of transparency.
Investors were also concerned with C&M's leverage given that debt/EBITDA is currently running just north of five times. However, specialists adds that C&M's adjusted debt/EBITDA could potentially be reduced to around 4% by year end.
One of the main challenges was educaing overseas investors on the company's regulatory and competitive position within the cable TV (CATV) market in South Korea. The leads positioned C&M as a company with a strong operating profile thanks to its dominant market sahre in the cable TV space.
"The Korean CATV market displays utility-like characteristics, commanding a leading position for TV broadcast distribution in that country," says Moody's in its rating assignment report. The agency adds that C&M benefits from, "The strong demographic characteristics of the markets in which it operates, primarily in or around Seoul. Such characteristics correlate to the potential strong demand for its new product offerings, specifically digital services and high speed data. The company enjoys the highest levels of subscription revenue for a Korean CATV operator, which is expected to grow."
C&M has 1.6 million CATV subscribers and over 310,000 internet subscribers. It is the second largest multi-system CATV operator in South Korea and Seoul's largest. It currenlty covers 43% of all Korean households.
C&M will use deal proceeds to repay outstanding credit facilities, as well as fr acquisition capital, capex and general operating funding.
The notes were issued via C&M's financing arm, C&M Finance and are backed by C&M Inc and its subsidiaries.
