Korea's Hana Bank printed $500 million of senior unsecured debt early yesterday morning following a bookbuild that lasted about 24 hours. The 5.5-year Reg-S/144A notes pay a fixed-rate coupon of 4.5% and were sold at a re-offer price of 99.836 to yield 4.534%. They were issued under the bank's existing $6 billion global medium-term note programme and will mature on October 30, 2015.
Hana followed the same pricing strategy as other Korean banks such as Shinhan Bank, Woori Bank, Export-Import Bank of Korea, Korea Development Bank and the Industrial Bank of Korea, which have all sold bonds with a 5.5-year maturity this year. The extension from a five-year tenor to 5.5 years allows the issuers to take advantage of the current steepness of the yield curve between five and six years to provide investors with a higher coupon at no extra cost, assuming they (the issuers) swap the cash flows from fixed to floating.
Hana did a non-deal roadshow at the end of March, at around the same time as Woori, but held off on launching a deal as it deemed the market backdrop to be unfavourable at the time.
"Markets were strong on Monday on the back of better economic data from the US and with the Greek sovereign situation continuing to stabilise," said a source, explaining why Hana chose to come to market early this week. In addition to the more stable macroeconomic trends, Asia saw equity markets open stronger and credit spreads in the Korean banking sector tighten.
Initial guidance was sent out late Monday morning at 205bp to 215bp over the equivalent five-year Treasury yield. By the close of the Asian trading session, the guidance had been revised to 200bp, plus/minus 3bp. At the time of the revision it was also confirmed to investors that Hana would be looking to issue a benchmark $500 million deal.
Woori was viewed as one of the key comparable issues and it was expected that Hana would price flat to the Woori curve. At the time of pricing, the Woori 2015 bonds that priced in late March were trading at a yield spread in the low 200bp area. The momentum behind the Woori 2015s helped push Hana to a tight price of 197bp -- through the Woori curve.
"This was a good deal, because there is still something left on the table for the bonds to perform in the secondary," said one source. "From an investor perspective, they were left with a sweet taste in their mouth," he added.
At the opening of Asian trading yesterday the bonds had tightened by 4bp from where they priced. And by the Asia close, the Hana 2015s were quoted at 194bp. In comparison, Woori was trading at Treasuries plus 195bp.
The bookrunners managed to secure a $3.5 billion order book from 220 accounts. Asian investors were sold 68% of the debt, offshore US investors took 23% and European accounts 9%. Fund managers were allocated 60% of the book, banks 16%, insurance houses 14%, private banks 9% and other types of investors the remaining 1%.
The notes received an A1 rating from Moody's, A- from Standard and Poor's and an A- from Fitch. Bookrunners were Bank of America Merrill Lynch, Citi, J.P. Morgan and Royal Bank of Scotland. Hana Daetoo Securities was a joint lead.
Hana last came to market in April 2009 when it sold $1 billion of government-guaranteed three-year bonds, making it the first Korean bank to access the government's $100 billion debt support programme that was set up in October 2008.
Bakrie Telecom is expected to be the next to price a deal. The Indonesian mobile operator is currently on the road with a $250 million high-yield bond with a five-year tenor that is callable after three years. Bank of America Merrill Lynch, Credit Suisse and Morgan Stanley are lead arrangers for the deal, which was announced earlier this week.
