KDB priced its first benchmark dollar deal of the year during New York's afternoon on Tuesday, benefiting from a strong market tone for Korean paper. The A3/A- rated group completed an upsized $850 million five-year bond, after going out with a base deal size of $500 million. However, officials had always said they was looking to raise between $700 million and $1 billion.
The final offer size was determined by where KDB felt it could best optimize pricing. Under the lead management of ABN AMRO, Citigroup and Deutsche Bank, the group had gone out with a range of 95bp to 100bp over Treasuries at the beginning of Asian trading on Monday.
After a two-day accelerated bookbuild, pricing came in at 99.56% on a coupon of 3.875% to yield 3.973%. This equated to a Treasury spread of 97bp and Libor spread of 58bp. Fees were a paltry 15bp.
At 97bp over Treasuries, the deal was priced on the tight side of fair value to Kexim. At the time of pricing, the latter was trading about 7bp to 8bp wider around the 104bp/105bp area. This is where it had originally been trading when indicative pricing was first announced.
Bankers say Asian spreads have held up fairly well in the face of weaker international markets over the past few days. "Cross-over credits have been softening quite a bit," says one. "International investors seem quite apathetic at the moment. Everyone's still wondering when US employment data will pick up and take the wind out of the bond market's sails."
However, most market participants believe KDB picked a good time for its trade. Its whole curve has tightened about 12bp to 18bp over the past month and sentiment towards the Republic is still good ahead of multilateral talks on North Korea's nuclear arms programme. The announcement, earlier this week, that Citigroup is to purchase Koram also buoyed sentiment.
Just over two weeks ago Kexim priced the five-year tranche of a $1 billion global bond with a coupon of 4.25% to yield 4.237%. This equated to 113bp over Treasuries, or 71bp over Libor. The deal just about managed to squeak in before the whole bond market ground to a halt as investors digested the last set of employment numbers to come out of the US.
Specialists say KDB's order book closed around the $1.2 billion level with participation by 106 accounts. By geography, the deal had a split of 53% US, 36% Asia and 11% Europe.
Most investors were said to be real money accounts, with little interest from momentum players. This was further reflected by deal's immediate secondary market trading pattern, with tightening of just 1bp during Asian trading yesterday.
