Joint leads HSBC, JPMorgan and Merrill Lynch priced Korea Development Bank's new five-year benchmark inside of initial guidance on Friday (September 9). The A2/A rated deal was launched at $500 million in size with an indicative price of 33bp over mid-swaps, but after building strong momentum was upsized to $750 million. Pricing was fixed at 99.709% on a semi-annual coupon of 4.691% to yield at 3.157%. This equated to 76bp over the 4.125% 2010 US Treasury and 32bp over mid-swaps.
The transaction was priced aggressively relative to the most recent five-year offering from Kexim, launched in March. Kexim's 2010 issue was trading at around 34bp over at pricing and non-syndicate specialists wondered whether KDB had squeezed too much out of the market in a bid to steal a march on its domestic rival. Over the past couple of years KDB has traded one to two points wider than Kexim in the secondary market.
More importantly, the deal priced flat to KDB's outstanding 2009 deal, which was trading at 30bp over Libor. The state-owned bank had been very sensitive in terms of timing because of recent volatility in US equity markets and a sell-off among Treasuries in the wake of the Hurricane Katrina disaster and the subsequent run on oil prices.
The leads launched the deal on Monday and priced it five days later after only one single presentation to investors in New York last Wednesday. Timing become even more important when on Tuesday the Korean Sovereign issued an RFP to investment banks for a possible dual currency $1 billion benchmark issue.
The job became even harder for the leads following an unconfirmed rumour that Kexim was possibly shopping tenders for a new dollar-denominated deal. Distribution was said to have had a larger than normal US-based asset manager component and deeper penetration into the US and Europe.
