Woori Bank sold a $500 million five-year bond on Tuesday night during US hours, joining GS Caltex and other South Korean companies that have tapped the international bond market this month.
The Reg S/144a fixed-rate senior unsecured note was issued 15bp tighter than the initial price guidance of 175bp above Treasuries, according to sources close to the deal. The bond was four times oversubscribed – an indication of strong investor demand for Korean credits – with 55% of investors coming from Asia, 28% from the US and the remaining from Europe.
Barclays, Citigroup, Deutsche Bank, HSBC, JPMorgan, Standard Chartered and Woori Investment & Securities were joint bookrunners of the deal, which falls under the company's $7 billion Global Medium Term Note Programme.
Meanwhile, GS Caltex raised a $400 million five-year bond on Monday night. The bond – with a yield of 3.25% – received a good response and was finally 6.5 times oversubscribed. Demand reached more than $2.6 billion, according to a source close to the deal.
Although that was already 25bp inside the initial price guidance of 215bp over Treasuries, the bond tightened further in early Asian trading with quotes as tight as 185bp in secondary markets.
The Asian market has not seen price tightening of this magnitude since the first quarter of the year, when markets were fairly bullish, says the source. This reflects the market’s positive tone towards the company as well as the lack of paper it has outstanding.
At the final spread of 190bp over Treasuries, a decent new issue premium was on the table over the nearest comparable, the GS Caltex 5.5% 2017s, last bid at Treasuries plus 145bp or a G-spread of 202bp.
The majority of GS Caltex’s notes - 64% - went to asset managers, followed by banks and insurance companies, accounting for 16% and 14% respectively. In terms of geography, Asian investors took the biggest chunk of the deal with 46%, followed by US and Europe-based investors, with 32% and 22% respectively, the source said.
Caltex – a Baa2/BBB-rated credit – is viewed by many investors as a leveraged play on Chevron Texaco, which owns 50% of the company. South Korea’s GS Holdings owns the other half.
The company intends to use the net proceeds from the offering principally to fund capital expenditures and for general corporate purposes.
Bank of America Merrill Lynch, Citigroup and Goldman Sachs were the joint bookrunners of this deal.
Korea-based issuers have been keen to access global markets, given favourable market conditions and buoyant demand.
Debt capital markets were supported by last Wednesday’s Federal Reserve announcement when the central bank said it would not yet begin tapering its current $85 billion monthly bond-purchasing programme.
“There has been a huge pipeline of Korean names since the beginning of the year that hasn’t been able to come to market and now we are seeing the broader market open,” said a source close to the Woori deal. “The uncertainty has been resolved with last week’s Fed statement where they delayed the tapering.”
This month alone, several local Korean institutions have accessed the dollar bond market.
Export-Import Bank of Korea (Kexim) on September 12 issued a dual-tranche $998 million note at a coupon of 2.875% for the five-year tranche and three-month Libor plus 85bp for the three-year one, according to Dealogic data. Korea Development Bank (KDB) on September 10 sold a $744 million five-and-a-half-year bond at a coupon of 3%.
