Korea's Export-Import Bank issues $1-B 10-year bonds

MANILA, Philippines - The Export-Import Bank of Korea (Kexim) had priced a $1-billion, 10-year bond issue.

According to FinanceAsia, the bookrunners were Bank of America Merrill Lynch, Credit Suisse, Daiwa, Goldman Sachs, HSBC and J.P. Morgan. Woori Investment & Securities was a joint lead.

The Asian dollar bond market has been more or less shut since August, with issuance dwindling to $1.7 billion in August, a far cry from the peak of $14.6 billion in April, according to data from Dealogic. Undeterred by the weak market conditions, Kexim seized a window of opportunity and closed its bond with lightning-quick execution.

“Markets have been very volatile – one day it’s up and the next day down,” said Yoon-Young Kim, chief financial officer of Kexim. “We have been watching the market for a few weeks and, in the end, we weighed the pros and cons and decided that the downside risk of not issuing is bigger and found a window before Obama’s speech to launch our deal.

He further added: “In these volatile markets, getting the timing right is very important for a borrower. The timing was right and we are happy with the transaction. We’ve also re-opened the market for other potential Korean borrowers which are also looking to tap the market.”

Bankers suggest that there are several other names such as Shinhan Bank, Hana Bank, Korea Finance Corp. and Korea National Oil Corp. that are planning to tap the bond market.

The deal was guided by Treasuries plus 250 basis points (bps). This guidance was revised to Treasuries plus 245 bps to 250 bps and the bonds priced at the tight end. The coupon was fixed at 4.375 percent and the notes reoffered at 99.456 to yield 4.443 percent.

Initially, there was talk that the size could be $1 billion to $1.5 billion, but Kexim showed restraint and kept it to $1 billion, mindful of the fragile state of markets. “We could have raised $1.5 billion but we did not want to disappoint investors in case the bonds did not trade well, so we decided to issue $1 billion,” said Kim.

Kexim gathered an orderbook of $3 billion from more than 210 orders, with half the deal allocated to US investors and strong participation from fund managers.

Keeping the deal size manageable proved to be the right decision as the bonds continued to perform in the secondary market and were quoted 4bp tighter at Treasuries plus 243bp/241bp on Friday morning.