Low interest rates and receptive investors keen to diversify credit exposure have created favourable conditions for Asian borrowers this month. While the high-yield sector has been dominated by Chinese property companies, Korean names have featured strongly among investment-grade borrowers.
Hana Bank was the latest to raise US dollar funding, with a $500 million issue launched on January 29.
It was the biggest three-year US dollar global bond by a Korean commercial bank since June 2009; as well as achieving the lowest re-offer US Treasury spread for such entities, accessible to onshore US investors, since September 2005.
Korean issuers have been busy during the first few weeks of the year. Korea Development Bank issued a $1 billion dual-tranche deal, Korea Southern Power raised $300 million with a Reg-S offering, Korea Gas Corp issued CHF300 million and Kookmin raised $300 million with a three-year deal.
The latter was the key reference point for the Hana issue. Kookmin’s issue on January 8 came with a 1.375% coupon and was re-offered at a 105bp yield premium to US treasuries.
The terms of Hana’s deal were remarkably similar.
The notes pay a 1.375% semi-annual coupon and were re-offered at 99.722 to yield 1.47% to a maturity date of February 5, 2016. That was equivalent to 105bp spread over the three-year US Treasury yield.
“The three-year tenor is a natural fit for Korean commercial banks, given that most have an asset duration of approximately 2.5-3 years,” said an analyst. Hana will use the proceeds from the issue to refinance existing debt.
The joint bookrunners were Barclays, Bank of America Merrill Lynch, Credit Agricole, HSBC and Standard Chartered.
The senior unsecured notes are rated A1 by Moody’s and a notch lower at single-A by Standard & Poor’s. They have been drawn down from Hana’s existing $6 billion global medium term note programme
The transaction was sold under the SEC’s Rule 144A, allowing participation by onshore US investors. Hana and its advisers conducted a two-team global roadshow during the past week, covering major investor cities in Asia, Europe and the US.
The announcement of the launch was made in the morning of the January 29, Asia-time with an initial guidance of 120bp over the three-year US Treasury yield. The lead managers attracted more than $1 billion of orders “from a broad spectrum of investors in Asia and Europe”, according to a market source.
The strong demand allowed the leads to compress final guidance to 105bp to 110bp ahead of the New York open. Ultimately, the deal priced at the tight end, and Hana achieved its target funding size of $500 million.
The final order book was about three times covered, with around 90 accounts participating. Half the notes were distributed into Asia, 36% were sold into the US and 14% into Europe. By investor type, approximately 47% were allocated to banks, 45% to fund managers, 6% to central banks and 2% to private banks.
Separately, Hana said this week that it would increase its ownership in Korea Exchange Bank (KEB) to 100% from 60% through a share swap. It was a widely expected decision since it paid $3.5 billion last year to Texas-based Lone Star for its 51.02% stake in KEB.
The share swap will take place on April 5 — subject to board and shareholder approvals — at an exchange rate of one Hana share to 0.1894302 share of KEB.
Hana, one of Korea’s four biggest lenders, was set up in 1971 as the country’s first short‐term finance and investment company. It gained a commercial banking licence in 1991 and provides full services to large companies, SMEs and households. The acquisition of KEB in 2012 was motivated by a need to strengthen its foreign exchange and trade finance businesses.
As of 30th September, 2012, its total loan book was W116,501 billion, and its assets, deposits and shareholder’s equity amounted to W157,352 billion, W108,231 billion and W11,454 billion, respectively.
In trading yesterday, the new Hana notes were quoted at the launch spread over the US Treasury yield.
