Shinhan Financial Group, one of South Korea’s most active offshore debt issuers, returned to the G3 bond market again on Monday and raised $500 million from a Tier 2 subordinated sustainability bond in an otherwise busy period for Asian financials.
As it stands, Shinhan has become the seventh institution out of Korea to issue sustainability bonds this year following the likes of POSCO, Kogas and Kookmin Bank.
Timing for the bond sale was not ideal as it was brought to the market ahead of the two-day trade talks between China and the US.
Meanwhile, a handful of financial institutions in the region were marketing their own bond deals at the same time. National Australia Bank and Malaysia’s Maybank priced their deals on the same day, while Export-Import Bank of India started a global roadshow for a $1 billion bond sale.
Shinhan Financial Group has a standalone rating of A1/A (S&P/Moody's), but both ratings agencies also assess the group according to the financial profiles of its key subsidiaries. S&P calls it a "stand alone credit profile" while Moody's calls it a "baseline credit assessment". Here the group is rated A-/A3. Both agencies have rated the new bond slightly below that - S&P two notches lower at BBB and Moody's, one notch lower at Baa1.
S&P said the rating reflects the bond’s contractual subordination as well as the fact that Shinhan Financial is a non-operating holding company that is subject to higher non-payment risks. It relies on dividend payments from its operating entities, namely Shinhan Bank, Jeju Bank, Shinhan Card and Shinhan Investment, to fulfil its debt obligations.
Moody’s said it had rated the new bond lower because it would be fully written down in the unlikely event that the group is designated as an insolvent financial institution by the Financial Services Commission or the Korea Deposit Insurance Corporation.
But this did not affect demand for the new paper as Shinhan managed to put together an order book of over $4.3 billion from 200 accounts, which was significantly larger than other recent sustainability bond issues.
The new US dollar, 10.5-year non-call 5.5-year deal was initially marketed at 175 basis points over five-year US Treasuries, which was quoted at 1.84%, before settling at 150bp over. The final coupon was set at 3.34% which is subject to reset every five years after the call date.
There is no direct comparable owing to a lack of Tier II callables in the Korean financial sector. Most fixed income analysts benchmarked the new deal against Shinhan Bank’s 3.875% 2026s callable December 2021, which was quoted at 3.062% late Monday.
With that comparison, Shinhan’s new deal due 2030 (callable February 2025) priced at a 28bp premium with a 37-month duration difference.
Distribution statistics show that Asian investors took half of the deal, while accounts in the US and Europe, the Middle East and Africa were allocated 34% and 16%, respectively. By investor type, fund managers and asset managers took 74%, insurers and corporations 19%, bank treasury 4% and private banks 3%.
Joint bookrunners of the bond sale were BNP Paribas, Citigroup, Credit Suisse, HSBC and Bank of America Merrill Lynch.
