SK Telecom returned to the international US dollar bond market this week after a five-year absence. In a blow-out deal, the leading Korean telecommunications firm raised $700 million and achieved the lowest coupon ever in the public market by any Asia-Pacific telco.
SK Telecom is part of SK Group, one of Korea’s biggest chaebol or conglomerates. It was set up in 1984 and now has a dominant share in the domestic market for mobile phone and wireless broadband services.
Its new bonds pay a semi-annual coupon of 2.125% and were reoffered at 99.423 to yield 2.237%. That was a spread of 147.5bp over the five-year US Treasury yield, at the tight end of final guidance.
The issue has a five-and-a-half year tenor, maturing on May 1, 2018.
Earlier this month, SK Telecom went on the road and met key investors in Asia, the US and Europe as part of a broader marketing exercise. On October 8, it raised $391 million from its sale of Posco shares in a club deal.
Asian investors were approached on Wednesday morning with price guidance of around 170bp. Enthusiasm for the deal meant that the order book already amounted to $4 billion by the time New York opened, according to a person familiar with the transaction.
As a result, the leads confidently narrowed the spread to 150bp over Treasuries, plus or minus 2.5bp. In the end, the issue was 7.9 times subscribed and received orders from 271 accounts.
The paper was drawn from the company’s $3 billion global medium-term note programme, and was sold under the US SEC’s Rule 144a.
The notes were distributed quite evenly across regions, with 43% sold to US accounts, 37% into Asia and 20% into Europe. By investor type, fund managers bought 64%, insurers 13%, commercial banks 11%, central banks and sovereign wealth funds 7%, and private banks 5%.
Both Standard & Poor’s and Fitch rate the senior, unsecured issue A- with a stable outlook, while Moody’s rates it the equivalent A3, but with a negative outlook.
The fees were thinly spread among six joint-bookrunners — Bank of America Merrill Lynch, Barclays, Credit Suisse, Deutsche Bank, HSBC and UBS.
