The National Agricultural Cooperation Federation (NACF) priced its maiden deal in yen yesterday (Thursday) raising Y30 billion ($283 million) via Citigroup and Daiwa SMBC.
The three-year deal was priced at par with a semi-annual coupon of 0.94% to yield 64bp over yen-libor. It came at roughly the same premium in Yen as the BBB+/A3 rated credit trades against the A3/A- rated KDB in dollars.
At the time of pricing KDB had a June 2007 0.98% Samurai outstanding at 56bp over yen-libor. In the dollar market, NACF has a 3.45% June 2008 deal outstanding, which was quoted yesterday at 53bp over Libor, while KDB has a 4.25% November 2007 deal outstanding at 42bp over. The libor curve is said to be fairly flat.
The deal was syndicated on a retention basis, with participation by about 35 accounts and a split, which saw 70% placed into Japan and 30% into Asia. The whole book was said to be new buyers to the credit.
Many of the prospective Korean borrowers in the pipeline appear to have adopted a strategy of targeting a new investor base or a different part of the curve. Bankers say this makes sense in a year when both the quasi sovereign borrowers and banks are all likely to raise more than they did in 2003.
Where $300 million was the average issue size in 2003, $500 million is shaping up to be the average issue size in 2004. Many borrowers are also trying to get their funding in early, ahead of a predicted widening of Treasuries and a new issue by the sovereign. The quasi sovereigns in particular are said to fear a repeat of last year's performance when the Republic was so aggressive about squeezing out every last basis point, it spoiled the market for any issuer that tried to follow it.
Conscious they need to raise more funds, a number of borrowers are swapping Reg S transactions for 144a issues in order to spread the distribution net wider than Asia and Europe. Kexim and Woori, which are both scheduled to price next week, are using 144a formats for the first time in a number of years.
Kexim launched roadshows yesterday in Asia for a 10-year deal via Barclays, Citigroup and UBS. The sovereign-rated group conducted conference calls with Asian clients before roadshows get underway in Los Angeles today (Friday). The team will then move to the East Coast over the weekend and hopes to price a deal on either Tuesday or Wednesday, but probably Tuesday.
The transaction has a base deal size of $500 million, but officials have said they are hoping to raise up to $1 billion. In targeting the 10-year part of the curve, Kexim is moving away from the five-year sector where it has priced its last three deals and hoping to draw in US investors.
The most comparable benchmark is KDB's September 5.75% September 2013 transaction, which was bid yesterday at 105.34% to yield 96bp over Treasuries or 53bp over Libor. At the short-end of the curve Kexim is still trading at a 7bp to 10bp premium to KDB. Its last deal in November 2003 priced at a 9bp premium on a like-for-like basis.
Roadshows are also scheduled to begin on Monday for a $500 million lower tier 2 transaction by Woori Bank. With Credit Suisse First Boston, JPMorgan and Merrill Lynch as lead managers, the deal has the standard 10 non-call five structure and should price around Thursday.
Woori also has relatively large funding needs in 2004 and is keen to re-finance its $850 million upper and lower tier 2 deal of 2000, which is callable at the beginning of next year.
Bankers are hoping the new transaction will benefit from the bank's one notch recent upgrade to Baa1 by Moody's. So far spreads have not really reacted to the news and Woori's 4.875% July 13c08 was bid yesterday at 98.50% to yield 5.26%, equating to 220bp over Treasuries or 181bp over Libor.
Most observers report a better market tone for Korean paper than prior to Chinese New Year. Spreads are currently being supported by greater onshore asset swap appetite and stronger offshore demand, as traders return from the holidays to cover their short positions.
