The leads released guidance earlier this week for the A3/A rated transaction at 27bp to 30bp over US Treasuries. The Reg-S 144a deal priced at 99.912% with a coupon of 25bp over three-month Libor, a launch spread of 27bp over Libor.
The leads received bids for over two-times the nominal amount of the deal, with over $1.25 billion coming from 50 accounts. Geographically the allocations were split 58% into Asia, 27% into Europe, and 15% into the US. By investor type, banks were allocated the majority of the book taking up 68%, while fund managers took 28%, and the remaining 4% was designated to other accounts.
In terms on comparables, investors looked at other Korean corporates that enjoy support from the government, such as Kexim and KDB which have long provided KoreaÆs main pricing benchmarks, Korea National Housing, as well as the sovereign itself.
Kexim, a quasi-sovereign, priced a five-year FRN in September at par with a coupon of three-month Libor plus 22bp. That deal is still being quoted around Libor plus 22bp. Rival quasi-sovereign KDB's 2012 paper is quoted at Libor plus 27bp.
Korea Water issued a $150 million singleûA rated five-year deal earlier this month. That deal was trading at a bid of 27bp over Libor. Bankers have also quoted Korean National Highway as a viable comparable. That deal is trading at a bid of 26bp over Libor.
Korea National Housing last tapped the global debt market in November 2005, with a Ç400 million five-year FRN, that deal is currently trading at 25bp over.
KNHC is a government-owned corporation established under the Korea National Housing Corporation Act. It is tasked with implementing national housing and housing-related policies as well as constructing and managing low-income public housing. The company's responsibilities include the provision of public housing for rent, residential property construction, and the development of new towns. It has a good track record in housing construction and residential site development. The federal government is heavily involved in the management of KNHC and, as such, the company benefits from continuous financial support from the government.
In its most recent ratings report, Standard & PoorÆs noted that: ôKNHC has a strong market position in the demand-driven residential real estate sector. As of fiscal 2005 (ended December 31, 2005), about 74% of its total revenue was from sales of houses, and 19% from sales of land. The company enjoys various tax benefits in its role as a national autonomous entity. However, an offsetting ratings factor is the company's aggressive capital structure, with a ratio of total debt to total capital of 66% as of December 2005.ö
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